For many investors, fixed-income investments play a key role in their portfolio, offering stability, diversification, and income potential. From traditional options like bonds and GICs to alternatives like MICs, explore the essentials of fixed-income investing to elevate your portfolio in 2025.
Key Takeaways:
- Fixed-income investments provide regular, predetermined payments, making them appealing to investors looking for stability.
- Investors can choose from a range of fixed-income products, including government bonds, corporate bonds, and alternative investments such as Mortgage Investment Corporations (MICs).
- Understanding credit, interest rate, and liquidity risks is essential for successful fixed-income investing.
What is fixed income?
Fixed income refers to a financial arrangement where an individual or entity receives regular, predetermined payments over a specified period.
Commonly associated with bonds and similar debt securities, fixed income as an asset class is characterized by its predictable income stream, making it appealing to those seeking stability and consistency.
Understanding fixed-income investing
Fixed-income investing involves investing money in securities that generate a predictable income stream, typically through regular interest payments, and return the principal amount at maturity.
What are fixed-income investments?
There are many kinds of fixed-income securities, though bonds are probably the best-known. Bonds typically have a set maturity period and offer the investor a semi-annual coupon (interest payment).
Other fixed-income products, such as mortgage investment corporations, guaranteed investment certificates (GICs), mutual funds, and money market securities, also offer steady income but differ in the type of return. Some generate dividends and capital gains, while others generate interest income, all of which are taxed differently.
How do fixed-income investments work?
When you buy a stock, you are purchasing a unit of ownership in a company. In contrast, when you invest in a fixed-income product, you are essentially lending your money to the issuer. Companies and governments issue these debt securities for investors to buy and, in return, give regular interest payments to the latter until the money is repaid.
For example, a company might issue a 5% bond with a $1,000 face or par value that matures in five years. The investor buys the bond for $1,000.
Each year, the investor receives $50 in interest payments (5% of $1,000), typically paid semi-annually in installments of $25. After five years, the company repays the full $1,000 principal amount to the investor. This structure provides the investor with a predictable income stream while supporting the company’s financing needs.
Yield
Yield refers to the return from a fixed-income investment. For a bond, yield is determined by the purchase price and the annual interest (or coupon) payments received. It often describes long-term interest rates.
On the other hand, Yield to Maturity (YTM) indicates the total return an investor can expect if the bond is held until it matures. This includes both the interest payments and the return of the principal amount.
Par Value
Par value is the face value of fixed-income products, specifically bonds. It also defines both the maturity and dollar values of coupon payments.
For example, if the par value of a particular bond is listed at $1,000, but the market price is 99.70/$100, your cost to purchase that bond would be $997. This means the bond is trading at a discount (below par value), which indicates that the bond’s yield is higher than the coupon rate, making it more attractive to investors seeking better returns.
Credit ratings
The credit rating of a bond issuer is a crucial indicator of its creditworthiness. Higher-rated issuers (or investment-grade bonds) are generally considered safer. Still, they may offer lower yields compared to lower-rated issuers (high-yield bonds).
Who is fixed income for?
Fixed-income investments are suitable for investors seeking stable, predictable returns. How much fixed-income products are allocated in a portfolio depends on the investor’s goal. Retirees looking for regular income streams may prioritize these investments, while those looking to diversify might blend fixed-income products with stocks to balance risk and enhance overall returns.
Types of fixed-income securities
What products are considered fixed income?
There are many types of fixed-income securities, from traditional to alternative options. Here are five types of fixed-income investments to consider in 2025:
Bonds
As mentioned above, bonds are loans made by an investor to an issuer. In turn, the issuer pays the investor interest and repays the principal at an agreed-upon maturity date.
There are different types of bonds, depending on the issuer:
| Government Bonds | Municipal Bonds | Corporate Bonds |
| Backed by governmental guarantees, providing stability and legal protections for investors | Not automatically guaranteed by the provinces in which they operate | Companies issue these to raise capital |
| Highest credit quality and most conservative bond available in Canada | Vary in credit rating | Can be investment-grade or non-investment grade |
Investors in corporate and government bonds can make money by holding the bond until maturity or selling it for more than they paid, which means a greater return on their investment. Another popular strategy with bonds is investing in a series of short-term bonds with staggered maturity dates to generate steady income over an extended period.
Guaranteed Investment Certificate (GIC)
A Guaranteed Investment Certificate (GIC) is a low-risk deposit investment offered by financial institutions such as banks and trust companies. GICs provide a predetermined rate of return over a specified duration.
Many GICs are protected by the Canada Deposit Insurance Corporation (CDIC) for amounts up to $100,000. Each issuer can offer full CDIC coverage, allowing you to invest, for instance, $300,000 across three different issuers—each fully insured by the CDIC.
Money Market Instruments
Money market products are short-term fixed-income securities sold at a discount and mature at par value. Investors then earn through the difference at maturity. Unlike bonds, money market products do not make coupon payments. Examples include treasury bills (T-bills) and commercial paper.
| Treasury Bills (T-bills) | Commercial Paper |
| Backed by governmental guarantees, providing stability and legal protections for investors | Unsecured promissory notes issued by corporations |
| Highly liquid with maximum maturity of one year. Lower potential returns that most other securities. | Highly liquid and issues in one-, two- and three-month terms. Highest returns compared to T-bills and BAs. |
Fixed-income ETFs and mutual funds
Bond funds are mutual funds or ETFs that primarily invest in bonds and other debt securities.
A bond mutual fund is an investment option that pools money from investors to purchase different types of bonds collectively. They can only be sold once a day after the market closes. In contrast, bond ETFs are traded on an exchange, allowing investors to buy and sell shares throughout the trading day.
Both bond mutual funds and ETFs are overseen by professional portfolio managers, which come at a fee.
Alternative fixed-income investments
Alternative investments generally offer higher-than-average returns than traditional assets, but they may also come with higher-than-average risks. Alternative fixed-income investments typically include private credit and real estate funds such as Real Estate Investment Trusts (REITs) and Mortgage Investment Corporations (MICs).
| Mortgage Investment Corporations (MICs) | Real Estate Investment Trusts (REITs) | Private Credit |
| MICs pool funds from investors to invest in mortgages, primarily to residential real estate borrowers. | REITs invest in income-generating real estate and distribute a portion of earnings as dividends. | Private credit involves lending to private companies or projects, often through direct loans or debt funds. |
| Generally low liquidity. | High liquidity for publicly traded REITs. | Low liquidity. |
| Maturity varies based on the underlying mortgages. | No fixed maturity; investments are ongoing as long as the REIT operates. | Investments are typically locked up for several years until maturity or exit. |
| Moderate risk with potential for higher returns than traditional bonds, but subject to real estate market fluctuations. | Moderate to high risk; potential for attractive returns through dividends and capital appreciation, influenced by real estate market conditions. | Higher risk due to potential borrower defaults, but offers higher returns compared to other fixed-income securities. |
What is the difference between fixed income vs equity securities?
Fixed-income securities are debt instruments that pay interest and return the principal upon maturity. In contrast, equities are shares of stock that represent ownership in a company. Equities don’t mature and aren’t guaranteed to pay dividends. In general, equity securities carry higher risk and potential returns compared to fixed-income securities.
Why invest in fixed income?
Fixed-income products appeal to investors for several reasons:
Benefits
Fixed income generation
Fixed-income investments can provide regular and predictable income. This steady income stream can be a source of liquidity in emergencies and reduce the volatility of a mixed portfolio’s returns.
Relatively less volatile
High-quality bonds, such as those issued by the Government of Canada, provide some degree of safety. And for those holding both fixed-income and equity securities (stocks), the stable payments of fixed-income products can partly offset losses from the occasional decline in stock prices.
Flexible options
There are different types of fixed-income products to choose from, with varying maturity and income options. In addition, most fixed-income assets are eligible for tax-advantaged accounts such as Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs).
Drawbacks
Credit and default risk
Credit risk is the risk that the issuer might default on interest payments or fail to repay the principal amount. Higher credit risk may have a more significant potential for loss. However, it also has higher potential returns.
On the other hand, default risk refers to the risk that you might not be able to sell the security quickly or at a fair price. Some fixed-income products are more liquid than others, meaning they can be sold more easily without a significant loss in value.
Inflationary risk
Inflation reduces the purchasing power of your money. For instance, a bond’s nominal interest rate does not consider inflation. This means if inflation is high, you can buy less with your received money.
Interest rate risk
Changes in market interest rates can significantly affect the market price of fixed-income securities. Bond prices usually move inversely to interest rates: when rates fall, prices rise, and vice versa.
Interest rate risk refers to the danger of rising rates leading to a drop in a bond’s market value. Bonds with longer maturities and lower coupon rates are more sensitive to these changes simply because they have more time to react to these fluctuations.
How to invest in fixed-income
Know your investing style
Are you investing for retirement? When will you need the money? Do you want higher returns but with a higher risk of losing your money or the opposite? These are some of the questions you need to ask yourself to know what kind of investor you are.
To help, consider creating an investment plan to determine your best investment strategy. It details your financial goals, how long you want to stay invested towards those goals, and how comfortable you are with fluctuations in the value of your investments.
Steps to invest in fixed-income securities
Investors looking to add fixed-income securities to their portfolios can do the following:
- Open an investment account: Choose a reputable platform that offers access to fixed income securities and decide what type of investment account suits your goals.
- Decide how to invest: You can purchase specific fixed-income products, such as Treasuries, GICs, and corporate bonds, or you can opt for a professionally managed fund, such as mortgage investment corporations, bond mutual funds and ETFs.
- Select your asset allocation: Evaluate how much you will allocate to fixed-income products and equities. Each asset class acts in their own unique ways, so it’s best to diversify your investments to manage risk.
- Rebalance your portfolio: Your priorities may change over time, so you need to make sure to update and rebalance your portfolio to ensure it remains aligned with your goals.
- Consult a Financial Advisor: Seek professional guidance to tailor a fixed-income strategy that aligns with your financial goals.
What is the minimum investment amount for fixed income?
The minimum investment amount for fixed-income securities can vary widely depending on the type of security. For example, Government of Canada (GoC) bonds typically have a minimum par value of $5,000. In contrast, mortgage funds may require higher minimum investments of $25,000, often in exchange for potentially higher returns.
How are fixed-income investments taxed?
Fixed-income investments are taxed differently than those from equities. While capital gains and dividends benefit from favourable tax treatment, interest earned on fixed-income securities is taxed as ordinary income.
A reliable fixed-income option: Amur Capital MICs
Amur Capital offers a unique opportunity for investors seeking an alternative fixed-income investment through Mortgage Investment Corporations (MICs). These alternative investments can provide attractive returns while maintaining a streamlined approach, combining ease of access with potential growth opportunities.
- Amur Capital Conservative Income Fund (ACCIF) provides investors with stability in returns and reliable income, with a focus on residential first mortgages. Its target net annual return is 9.00%.
- Amur Capital Income Fund (ACIF) offers investors stability and income growth. Established in 1984, it focuses on first—and second-home mortgages and has a target net annual return of 11.00%.
- Amur Capital High Yield Fund (ACHYF) is for investors willing to accept increased risk. The fund focuses on higher ratio mortgages over shorter terms and has a target net annual return of 13.00%.
Contact our Investor Relations team today to learn how you can enhance your portfolio with our alternative fixed-income offerings.
