BLACKROCK FINANCIAL LITERACY

Fixed Income investing at BlackRock

Fixed income securities, or bonds, are issued by companies and governments as a way of raising money. They’re basically an ‘I.O.U’ – designed to provide a regular stream of income (which is normally a fixed amount) over a specified period of time.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Key Takeaways

  • 01

    Fixed income investing

    Fixed income investments could help you generate a steady source of income. Investors receive a fixed amount of income at regular intervals in the form of coupon payments on their bond holdings.

  • 02

    Benefits of fixed income

    Diversification from stock market risk. Fixed income is broadly understood to carry lower risk than stocks. This is because fixed income assets are generally less sensitive to macroeconomic risks, such as economic downturns and geopolitical events.

  • 03

    Choosing a portfolio

    An investment fund that works well for one person may not be the best fit for another. As with any investment decision, it's important to first understand what you're trying to achieve, your “investment goals”, and then identify the best strategy or fund to get there.

Risk: Diversification and asset allocation may not fully protect you from market risk.

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Why BlackRock for fixed income?

Deep expertise

400+ specialists covering every sector of the bond market1.

Broad range of strategies

Across different maturities, credit qualities, sectors and geographic regions.

Rely on our scale

Our goal is to provide you with the quality and value you deserve and expect.

Deep expertise

400+ specialists covering every sector of the bond market1.

Broad range of strategies

Across different maturities, credit qualities, sectors and geographic regions.

Rely on our scale

Our goal is to provide you with the quality and value you deserve and expect.

1 BlackRock, 30 September 2024

Which fixed income fund is best for me?

Actively managed funds are overseen by a fund manager who selects and manages investments, pursuing attractive opportunities while seeking above-benchmark returns. With experts across the world’s bond markets, BlackRock combines global reach with local expertise to identify compelling opportunities.

Unconstrained strategies

Unconstrained fixed income strategies are benchmark free. This means they can navigate across the breadth of the fixed income universe. 

Short duration strategies

Short duration strategies may be suitable for those looking to reduce the effects of a change in interest rates.

Investment grade credit

Investment grade credit strategies are those that have a lower risk of credit default and may be an option for conservative investors.

High yield credit

High yield funds have lower credit ratings than investment grade bonds and may be an option for investors looking for potentially higher return and willing to take on more risk of default.

Emerging markets debt

Emerging markets debt is issued by countries and companies in developing economies and nations. BlackRock has a variety of emerging market debt funds to choose from for those wanting to capture the opportunities present in emerging economies.

Sustainable solutions

Our Fixed Income sustainability platform spans the breadth of the fixed income asset class.

We have dedicated sustainable investment specialists.

What are the risks associated with fixed income?

There are four major risks associated with fixed income:

  • Interest rate risk
    When interest rates rise, bond prices fall, meaning the bonds you hold lose value. Interest rate movements are the major cause of price volatility in bond markets.
  • Inflation risk
    Inflation is another source of risk for bond investors. Bonds provide a fixed amount of income at regular intervals. But if the rate of inflation outpaces this fixed amount of income, the investor loses purchasing power.
  • Credit risk
    If you invest in corporate bonds, you take on credit risk in addition to interest rate risk. Credit risk (also known as business risk or financial risk) is the possibility that an issuer could default on its debt obligation. If this happens, the investor may not receive the full value of their principal investment.
  • Liquidity risk
    Liquidity risk is the chance that an investor might want to sell a fixed income asset, but they’re unable to find a buyer.

You could manage these risks by diversifying investments within your fixed income portfolio.

Risk: While the investment approach described herein seeks to control risk, risk cannot be eliminated.

WRAP UP

Fixed Income strategies overview

  • A fixed income portfolio seeks to preserve capital while generating regular interest payments.

  • A fixed income portfolio focuses on income, offering regular interest payments, while an equity portfolio aims for capital appreciation through stock investments. The two strategies are often used together for diversification, balancing growth potential with income and stability.

  • Bonds and other fixed income assets tend to be less volatile than stocks. By including fixed income in a portfolio, investors can achieve diversification and create a more balanced portfolio.

  • Interest rates have a significant impact on fixed income investments like bonds. When interest rates rise, bond prices generally fall because newer bonds are issued with higher yields, making older bonds with lower interest rates less attractive. Conversely, when rates fall, bond prices tend to rise. This inverse relationship between interest rates and bond prices is a key consideration for investors, as it can affect the value of their fixed income portfolio over time.

Discover our fixed income funds

BlackRock offers a vast range of fixed income investment solutions for investors to choose from.
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