Three Common Types of Fixed Income Investments

Colin Robertson serves as executive vice president of investment firm Northern Trust in Chicago, Illinois. In his position as a banking executive, Colin Robertson advises both internal partners and external clients in areas like fixed income investing.

A fixed income investment is a type of security which yields paid income at an established rate in regular intervals. Listed below are three of the most common types of fixed income investments.

1. Treasury Bill: A treasury bill is a simple fixed income security that can be purchased at initial auction at maturity rates of three months, six months, or one year. Individuals purchase treasury bills at a price that is less than face value, then earn the full value of the bill from the government once the maturity date has been reached.

2. Corporate Bond: A corporate bond is a security that acts as an avenue for a business’ debt financing. These types of fixed income investments allow investors to lend money to a company while earning low rate interest payments over a set period of time.

3. Municipal Bond: Like a corporate bond, a municipal bond is a debt security, but it is issued by a nonprofit or a public organization on the state, municipal, or county level rather than a corporation. This type of bond is exempt from state and local taxation in many areas and the funds are typically used to build public infrastructure projects.