Building a better investment with fixed income funds
In recent years, the world has faced several challenges. Most pressing right now is the seemingly unmanageable coronavirus pandemic. In addition to its impact on investments, the pandemic has caused a major economic shock, testing all businesses.
The experiences of many business owners and investors have opened their eyes to the fragility of their business and their investments. Thus, adapting to change has become vital for business sustainability and individual growth.
Individuals and businesses should regularly analyze their investment portfolios to ensure they are receiving maximum return on investment. In an effort to minimize risk, renewed attention has recently been given to the fixed income market. Cautious investors turned to fixed income funds.
The reason is simple: fixed income funds are generally low-risk investments. This is because their assets are generally less sensitive to macroeconomic risks, such as economic downturns and geopolitical events.
A fixed income fund is an investment vehicle that pays you a fixed interest or dividend payment until the maturity date. At maturity, you are reimbursed for the capital you invested. A fixed-income security is different from stocks that may pay you no dividends or variable-income securities, where payouts may change based on certain underlying measures such as short-term interest rates. On the contrary, the payments of a fixed income security are known in advance. Fixed income funds are mutual funds that focus on investing in debt securities.
Stanbic IBTC Asset Management fixed income funds include mutual funds such as Stanbic IBTC Money Market Fund, Stanbic IBTC Bond Fund, Stanbic IBTC Dollar Fund, Stanbic IBTC Guaranteed Investment Fund and Stanbic IBTC Enhanced Short- Term Fixed Income Fund.
Mutual funds are pooled funds that pool money from multiple people and the money is then invested in stocks, bonds, or other assets. On the other hand, a dollar fund is an open-ended foreign currency fund (US dollars) that is borrowed to buy assets. The funding currency (naira) will have a low interest rate and is used to fund the purchase of a high-yielding asset currency.
Another fund offered by Stanbic IBTC Asset Management is the Shari’ah Fixed Income Fund. The Shari’ah Fixed Income Fund aims to provide ethical investors with liquidity and competitive returns. This is achieved by investing in quality Sharia-compliant securities such as Sukuks and other eligible fixed-term contracts. A Sukuk is an Islamic financial certificate, similar to a bond in Western finance, which conforms to Islamic religious laws commonly referred to as Shari’ah.
Since the traditional Western interest-paying bond structure is not allowed, the issuer of a Sukuk essentially sells a certificate to a group of investors and then uses the proceeds to purchase an asset in which the group of investors investors holds a partial working interest. The issuer must also contractually commit to redeem the bond at a future date at par.
Unlike the Shari’ah Fixed Income Fund, the Guaranteed Investment Fund is an investment product that allows you to invest in various types of funds and receive a set minimum amount once the fund’s maturity date has passed. due date.
It is important to understand that all fixed income funds available have some potential risks, such as interest and inflation risk. However, the investment approach that fixed income funds focus on generally mitigates risk in certain markets.
Certain fixed income assets, such as the Bond Fund, offer the possibility of generating attractive returns. You can seek higher returns by assuming more credit risk or interest rate risk.
Fixed income funds are useful for achieving your financial goals. Determined to give you a head start, Stanbic IBTC Asset Management offers you valuable investment securities to enhance your portfolios and preserve your capital.
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