When looking for investing options, many take the time to plan for short, medium, and long range situations. Short term strategies usually look for quick cash investments that give a good return in less than a year. Long term strategies usually look at potential returns out over 10 or more years. In between the short and long, is the medium term. Most investors consider these investments anything that will come to maturity between 1 and 10 years out from the current point.
Fixed income securities are those that will give you a set amount of income over a certain period. There are short, medium, and long term fixed income securities on the market at any given time. Bonds are the most commonly thought of financial instrument that fits into this definition. And there are bonds that are short, medium, and long term in nature. Other financial instruments fit into this category though.
Why invest in medium-term fixed income securities? When you are looking at your portfolio, the experienced investor knows that a certain percentage of any portfolio needs to look at stabilization. Stocks can be quite volatile. To keep a core of the portfolio stable, investing in fixed-income securities is one way to go. The medium-term securities offer a steady source of income for the portfolio in the next five to ten years.
Diversification of a portfolio needs to happen in multiple directions. For example, you need to have both stocks and bonds in a portfolio to keep stock market fluctuations from bombing a portfolio’s value. Another form of diversification is getting different types of bonds or stocks. Having too much stock in one company can kill a portfolio if the company gets into trouble. Another form of diversification is to get a mixture of short, medium, and long term fixed income securities. These can help stabilize the portfolio’s value in different time frames.
Medium term fixed income securities are a good way to maintain stability for the next few years if you see the market getting bearish or going through wild fluctuations that would give you heart palpitations. These investments can happen directly on the OTC market. You can also find funds that invest in these fixed income securities. They will give you the stability you require without the need to manage these investments closely.
Keep your portfolio healthy with a diverse arrangement of investments. Put medium term fixed income securities in the mix today.