A fixed-income investment is one of the popular investment options that even an amateur investor will be aware of. It is the traditional investment option where an investor invests in a product most likely government or corporate bonds and gets fixed interest payments till the end of the maturity date. At the end of the maturity period, the investor can withdraw the principal amount invested.
Working of Fixed-Income Investment
The fixed-income is a low-risk investment option. It is mostly opted by investors with less risk appetite. Banks or financial institutions offer bonds from the government or corporate companies to raise funds for their everyday or certain operations. And the investors get interest returns on a monthly or dividend basis. The bonds or deposits are signed for a particular time period which is called maturity. Once the maturity period is over, the investors can withdraw the invested amount which is known as the principal amount.
For example, if an investor is investing AED 10,000 lumpsum amount on a bond for a maturity period of 5 years at an interest rate of 10% per annum. For the next 5 years, the investor will get AED 1000 as profit every year and at the end of the 5th year, the investment can be withdrawn.
Irrespective of the market conditions, a fixed profit is provided hence this is called a Fixed-Income Investment. Fixed-income investment is a short-term investment option that is mostly recommended to investors who are close to retirement and can’t take risks with their money. Apart from the ones who are close to retirement, it is considered by investors to balance their investment portfolio. Whenever there is a high-risk investment option in the portfolio, it is recommended to have the right balance by including a low-risk option. And fixed-income investments is the preferred one in such cases considering their low-risk profile.
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Top 5 Best Fixed-Income Investments in UAE
To invest in a Fixed-Income bond in a government or private company, an individual needs to sign up with a bank or financial institution that offers such investment solutions. These banks and financial institutions which offer investment or wealth management solutions charge a minimal fee for providing the service. Here are the 5 best fixed-income investment solution providers in the UAE which provides greater visibility to worldwide companies.
1. HSBC Fixed Income Bonds
HSBC offers a different range of bonds from the USA, Middle East, Asia, etc. It includes bonds from different government and corporate companies. These are provided in different currencies like USD, EUR, GBP.
Features of HSBC Fixed Income Bonds
- Can Invest in bonds worldwide
- Available in international currencies
- A regular stable income is provided
- Can sell the bonds if the market value increases
- A premier wealth relationship manager is available to guide
2. Mashreq Fixed Income Securities
Along with several banking products and services, Mashreq offers fixed Income Securities as a part of their investment solutions.
Features of Mashreq Fixed Income Securities
- Wide range of yields and maturities
- Offers both conventional and Islamic bonds
- Easy access
- Exclusive for Mashreq Gold customers
Also, Check: Checklist before making Investments
3. FAB Sukuk Income Funds
First Abu Dhabi Bank (FAB) provides Sukuk Income Funds exclusively designed for investors looking for investments through Sharia-Compliant.
Features of FAB Sukuk Income Funds
- Provides sharia-compliant options
- Offers Government, Government related entities and private entities
- Investment options in the UAE and MENA region
- A minimum investment of USD 500 is needed
- Both Individuals and companies can avail
- 1% of the investment amount is charged as Annual Management Fee
- 2% of the investment amount is charged as a Subscription Fee
- Returns will be credited to the FAB bank account
4. National Bonds – Savings Bonds
National Bonds is owned by the government of Dubai and is popular among the UAE residents. They offer different savings and investment options. Savings bonds are a famous fixed income investment but unlike other bonds the interest rate is not fixed, it keeps fluctuating depending upon the profits earned by the National Bonds that year. In the year 2020, the profits provided on Regular Savings Bonds are 1.74%.
Features of National Bonds – Savings Bonds
- Sharia Compliant
- Profit rates keep fluctuating and are decided at the year-end
- Can start as low as AED 100
- One bond costs AED 10
- A minimum of 10 bonds should be purchases
- Low risk and decent profits
- Along with the profits, bondholders can take part in lucky draws and bonuses
- Can be purchased online
5. Emirates NBD Fixed Income Bonds
Emirates NBD offers Fixed Income Bonds for investors on attractive interests and an option for portfolio diversification.
Features of Emirates NBD Fixed Income Bonds
- Includes large companies and Government entities
- A relationship manager is provided
- While listing a company (borrower) they check creditworthiness, currency, market conditions, appetite for bonds
Difference Between Fixed Income Investments and Fixed Deposits
The working of fixed-income investments and fixed deposits may seem similar where you buy a bond and earn profits on it. But there is a slight difference between Fixed Income Investments and Fixed Deposits. If the company goes bankrupt or assets are being liquidated, then the fixed income bonds investors are paid out first but in the case of fixed deposits, the investors are not cleared on the top. And the investment amount of fixed income investment is invested in a company (private or government) while the fixed deposit amount is used for the bank or financial institutions as per their finances.
Fixed Income Bonds are considered less risky investment options and the investment tenure can be decided by the investor according to the investment goal.
Disclaimer: The fixed-income investment options listed here are for reference. It is advised to check the historical figures before investing and take the guidance of an investment planner.