Seeking Regular Income Distributions from Fixed Income Securities

Fixed Income securities are debt investments representing a loan from an investor to a borrower. Governments, corporations, and institutions issue these securities to raise capital in exchange for a fixed-interest return. Debt securities can offer investors a reliable source of income, potential capital appreciation and portfolio diversification. They can be a great way to diversify a portfolio and generate a steady income stream.

Understanding debt securities or fixed income securities

Debt Securities, also known as Fixed Income Securities, are financial instruments that represent a loan made by an investor to an issuer, such as a corporation or government. In return for lending the funds, the issuer promises to pay the investor a fixed or floating interest rate over a specified period and to repay the principal amount at maturity. Debt securities can take the form of bonds, notes, bills, and other types of fixed-income instruments.

In Australia, debt securities are regulated by the Corporations Act 2001, which sets out the legal framework for the issue and trading of securities, including debt securities. The Act requires that issuers provide relevant information to investors, including the terms and conditions of the securities, and sets out the obligations of the issuer and the rights of the investors.

There are various types of debt securities, including:

  • Government bonds: Issued by the government, government bonds are considered among the safest fixed-income investments, as the risk of default is low.
  • Corporate bonds: Issued by corporations, corporate bonds are considered to be riskier than government bonds, as the risk of default is higher. However, they can offer higher yields compared to government bonds.
  • Floating rate notes: Floating rate notes pay a variable rate of interest tied to a benchmark interest rate, such as the interbank lending rate. This type of security can benefit investors looking for income protection against rising interest rates.
  • Convertible bonds: Convertible bonds can be converted into a specified number of shares of the issuer’s stock. This type of security could benefit investors seeking exposure to the equity market while also receiving a fixed income stream.

Debt securities play an essential role in a portfolio, as they can provide a stable income source and help diversify the portfolio by reducing the overall risk. Debt securities can also be used to manage interest rate risk, as they can provide a hedge against rising interest rates. However, investors should be aware of the credit risk associated with debt securities, as the issuer may default on their obligation to repay the principal and interest.

Overall, debt securities are a practical tool for investors seeking a stable source of income. Still, before investing, it is important to consider potential risks such as credit risk, interest rate risk, and other factors.

How we can help

A range of financial institutions, including banks, independent wealth management firms, and boutique investment firms, serves Australia’s debt securities or the fixed-income securities market. These institutions, including B. Moses Asset Management and our Private Wealth arm, offer a wide range of investment products and services tailored to the specific needs of HNW and sophisticated investors.

Our team of experienced Private Wealth Advisors will work closely with you to create a customised investment strategy that aligns with your specific financial goals. We will provide regular updates on your investments and transparent reporting to ensure that you are always informed about your portfolio’s performance. With our expertise and commitment to providing the best possible returns for our clients, you can expect us to be accountable to you and trust us to be objective throughout your advice and investment journey with BMP Wealth.