Fixed Income Investments have had a long history and are aimed primarily at those people who are looking for a lower risk investment that will produce a fixed monthly payments above inflation over a period while preserving the capital amount invested.
For private investors, Fixed Income investments are tax efficient investments as the income is annuity income with only a portion of the annuity income taxable.
In the case of Pension Funds, the income is tax free.
Unfortunately companies of any nature, unless non profit organisations do not qualify for any tax free portions on the annuity income.
There is generally speaking a 5 year minimum investment period on any Fixed Income Investment with minimum starting investment amounts at around R50 000. At the end of the 5 year period you are free to re-invest your capital or draw the full amount and invest it in other investment vehicles.
For people close to retirement that have an amount of discretionary income to invest, a portion invested in a fixed income investment is a very good option that will provide a guaranteed income for the period that can be used to invest in other, more risky investments that have the ability to offer higher potential returns like certain unit trust investments that offer exposure to emrging market funds or other higher risk unit trusts.
Talk to your investment advisor about ETF’s which have shown tremendous returns and although high risk warnings are common in the documentation, may be a very viable option as part of your retirement planning strategy. Always use a diverse range of investments through the risk spectrum as part of your retirement plan and avoid putting all of your investments in one basket.