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Fixed Income Investing

Fixed income investments are designed to generate a specific level of interest income, while also providing diversification, capital preservation, and potential tax exemptions.

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What are fixed income investments?

Fixed income investments are a type of investment designed to generate income and help provide capital preservation. If you're looking for potential tax benefits and want to diversify your portfolio, high-quality fixed income investments could be an option for you. 

Bonds, such as U.S. Treasuries and corporate or municipal bonds, are traditional types of fixed income investments. Investors may also consider mutual funds and ETFs that hold fixed income investments.

Why invest in fixed income?

Whether your goal is to diversify your investments, save for the future, receive dependable income, preserve principal, or help minimize taxes, fixed income investments could be a way to reach your goals.

The benefits and risks of fixed income investing

The Benefits and Risks of Fixed Income Investing
  • Benefits
  • Risks
  • Benefits
    Fixed income investments generally carry lower risk than stocks. They also function well as a way to generate income or value from your investments on a consistent basis.
  • Risks
    Just because fixed income funds usually are less risky options doesn't mean there is no risk involved. As with stocks, your fixed income investment could be affected by external factors such as market conditions, inflation, or interest rates.

Think about your fixed income investment objectives.

  • Generate Income icon

    Generate Income

    Use fixed income securities to provide a regular, predictable stream of revenue.

  • Diversify icon

    Diversify your portfolio

    Help smooth out the highs and lows in a stock portfolio with fixed income securities.

  • Protect icon

    Protect your investments

    Add stability to your portfolio with high-quality fixed income investments, like Treasuries, CDs, or other highly rated bonds.

  • Tax icon

    Create tax benefits

    Some fixed income securities, like municipal bonds, generally have preferential tax treatment where coupon payments Tooltip may be exempt from federal and state income taxes.

Consider your investing style:

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Get professional management of your fixed income investments.

  • Wasmer Schroeder™ Strategies

    Wasmer Schroeder Strategies offer a wide range of fixed income separately managed accounts across the duration, credit, and tax-efficiency spectrums. The choices include actively managed and bond ladder portfolio strategies with both taxable and tax-exempt debt securities. Fixed income investment minimums start at $250,000.

    Learn more about Wasmer Schroeder Strategies

  • Other professionally managed solutions

    Discover a wide range of wealth and investment management solutions, including separately managed accounts for specialized investment strategies to help you meet your needs. Investment minimums vary by service but may start as low as $5,000.

    See all our investment management offerings

Manage your own fixed income investments.

Bond mutual funds & bond ETFs

These are professionally managed investment products made up of a diversified mix of underlying securities, often with low investment minimums.

Learn more about bond mutual funds and bond ETFs >

Certificates of deposit (CDs)

CDs are federally insured1 bank deposits that pay a stated amount of interest for a specified period and promise to return your money on a specific date. Certain conditions must be satisfied for FDIC insurance coverage to apply. Charles Schwab & Co., Inc. is not an FDIC-insured bank and deposit insurance covers the failure of an insured bank. Please visit the Schwab CD OneSource® page for a list of insured financial institutions that offer CDs through Schwab.

Learn more about CDs >

How to buy CDs online >

Individual bonds

Bonds typically pay a set schedule of fixed interest payments and promise to return your money on a specific maturity date.

Learn more about individual bonds >

U.S. Treasury Bills

Considering U.S. Treasury Bills as another option for your investment cash?

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Take advantage of our fixed income investment expertise.

Stay at the forefront of modern investing with insights and ideas from Schwab experts, including Collin Martin, Head of Fixed Income Research and Strategy Chartered Financial Analyst (CFA®), Schwab Center for Financial Research.

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Collin Martin: Head of Fixed Income Research and Strategy

Talk to a Schwab fixed income specialist.

Our specialists offer objective, non-commissioned guidance on a wide range of fixed income products and strategies including ladders, bullets, barbells, and more. You can expect personalized service on topics such as: 

  • Help with choosing from a wide variety of investment options
  • Suggestions for adjusting to changing market conditions
  • Assistance with using our online trading features
     

Call 877-903-8069

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Common questions about fixed income investments

There are many different types of fixed income investments, with each type offering different risk and return characteristics. U.S. Treasuries are the most common type of fixed income investment and are generally considered to have the highest credit quality as they are backed by the full faith and credit of the U.S. government. Other examples of fixed income investments include certificates of deposit (CDs), municipal bonds, and corporate bonds.

Investors who prefer to invest through funds can consider either bond mutual funds or bond exchange-traded funds (ETFs). Bond mutual funds and ETFs can offer professionally managed, diversified investments for investors, for a fee. Investors can purchase a bond mutual fund or ETF just like they would place an order for most other mutual funds or ETFs.

The safety of a bond fund depends on the risks of its underlying holdings. There are two primary risks with fixed income investments, credit risk and interest rate risk. Credit risk is the risk that the issuer won't pay the investor back in a timely fashion and interest rate risk is the risk that the value of the fixed income investment will fall if interest rates rise. A bond fund that mainly invests in highly rated investments, like U.S. government securities or investment grade corporate or municipal bonds, would generally be considered to have low credit risk, but the value of the fund may still fluctuate as interest rates fluctuate. A fund with a shorter duration, a measure of interest rate risk, will fluctuate less in price than one with a longer duration, all else equal.

Unlike individual bonds, most bond funds don't have a maturity date or a predictable value at maturity. Individual bonds can help investors plan for future expenses given their stated par value and maturity dates, but bond funds don't offer that same benefit.

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1. Funds deposited at an FDIC-insured institution are insured, in aggregate, up to $250,000 per depositor, per insured institution based upon account type by the FDIC. The FDIC considers any other deposits you may have with an issuing bank. CDs you purchase from a particular bank are aggregated with any other deposits you may have with the issuing bank for determining FDIC insurance coverage (i.e., if you already have deposits of $250,000 with a bank, don't purchase CDs from the same bank in the same ownership category). Because the deposit insurance rules are complex, you may want to use FDIC's online tool, Electronic Deposit Insurance Estimator (EDIE), to estimate your total coverage at any particular bank.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.

Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market.

Portfolio Management for the Wasmer Schroeder Strategies is provided by Charles Schwab Investment Management, Inc., dba Schwab Asset Management®​, a registered investment adviser and an affiliate of Charles Schwab & Co., Inc. (“Schwab”). Both Schwab Asset Management and Schwab are separate entities and subsidiaries of The Charles Schwab Corporation.

The Wasmer Schroeder Strategies are managed by Schwab Asset Management®, a registered investment adviser and an affiliate of Charles Schwab & Co., Inc. ("Schwab").

Please refer to the Charles Schwab Investment Management, Inc. Disclosure Brochure for additional information.

Certificates of deposit available through Schwab CD OneSource typically offer a fixed rate of return, although some offer variable rates. All CDs in CD OneSource® are offered by FDIC-insured banks.

In the bond market, there is no centralized exchange or quotation service for most fixed income securities. Prices in the secondary market generally reflect activity by market participants or dealers linked to various trading systems. Bonds available through Schwab may be available through other dealers at superior or inferior prices compared to those available at Schwab. All prices are subject to change without prior notice.

Schwab reserves the right to act as principal on any fixed income transaction, public offering or securities transaction. When Schwab acts as principal, the bond price includes our transaction fee (outlined above) and may also include a markup that reflects the bid-ask spread and is not subject to a minimum or maximum.  When trading as principal, Schwab may also be holding the security in its own account prior to selling it to you and, therefore, may make (or lose) money depending on whether the price of the security has risen or fallen while Schwab has held it. When Schwab acts as agent, a commission will be charged on the transaction.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner, or investment manager.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.