What does the term 'fixed-income securities' primarily refer to?

The term 'fixed-income securities' primarily refers to bonds that provide regular interest payments. This classification of securities is characterized by the predictable returns they offer, typically in the form of periodic interest payments (coupons) to investors, which are often received semi-annually or annually.

Bonds are a common type of fixed-income security, and they represent a loan made by the investor to the issuer, which could be a corporation, a government, or another entity. The issuer promises to pay back the principal amount at the maturity date, along with the interest payments at agreed-upon intervals. This defined structure of payments contrasts with equities, where dividends (if any are paid) can vary significantly based on the company’s performance and decisions made by its board of directors.

While real estate investments might offer steady returns, they do not fall under the fixed-income category; instead, they are classified as alternative investments. Commodities similarly do not provide fixed periodic returns and are subject to market price fluctuations, which is another reason they do not align with the definition of fixed-income securities.