IN a bid to minimise risks, prudent investors have turned to fixed-income funds as Stanbic IBTC Assets Management sues for a renewed focus on the fixed income market.
The firm, in a note to clients, observed that the experiences many business owners and investors have faced due to the Coronavirus has opened their eyes to how fragile their business and investments may be.
Thus, adaptation to changes has become vital to business sustainability and individual growth.
According to the note, individuals and businesses have to regularly analyse their investment portfolios to ensure that they receive maximum returns on investment.
“The reason for this is simple: fixed-income funds are generally low-risk investments. This is because their assets are usually less sensitive to macroeconomic risks, such as economic downturns and geopolitical events,” it stated.
The firm explained that a fixed-income fund is an investment instrument that pays investors a fixed interest or a dividend payment until the maturity date.
“At maturity, you are repaid the principal amount you invested. A fixed-income security is unlike equities that may pay no dividend to you or variable-income securities, where payments can change based on some underlying measure such as short-term interest rates.
“Rather, the payments of a fixed-income security are known in advance. Fixed income funds are mutual funds that focus on investing in debt securities,” it explained.
Experts note that all the available fixed-income funds have a few potential risks, like interest and inflation risks.
However, the investment approach that fixed-income funds focus on usually mitigates the risks in certain markets.
Some fixed-income assets, like the Bond Fund, offer the potential to generate attractive returns.
Investors can seek higher returns by assuming more credit risk or interest rate risk and they are useful in fulfilling financial goals.
Examples of such are the Stanbic IBTC Asset Management fixed-income funds which include mutual funds like the Stanbic IBTC Money Market Fund, Stanbic IBTC Bond Fund, Stanbic IBTC Dollar Fund, Stanbic IBTC Guaranteed Investment Fund, and the recently launched Stanbic IBTC Enhanced Short-Term Fixed Income Fund.
Explaining further, it disclosed that Mutual funds are pooled funds that bring together money from many persons 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 purchase assets. The funding currency (Naira) will have a low-interest rate and is used to finance the purchase of a high-yielding asset currency.
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