What is the primary characteristic of fixed income securities?

The primary characteristic of fixed income securities is that the issuer pays interest over the term of the investment. These securities are designed to provide a return in the form of regular interest payments, known as coupon payments, to the investor. This predictable cash flow is a fundamental feature, allowing investors to receive a set amount of income at specified intervals until maturity, at which point the principal amount is returned.

In contrast to equity securities, where dividends may fluctuate based on a company's profits and are not guaranteed, fixed income securities generally offer more stability and predictability regarding income. The nature of fixed income securities means that they do not typically experience the same level of volatility associated with stock markets, making them a popular choice for investors seeking consistent income. Additionally, fixed income securities are not limited to issuance by banks; a variety of entities, including corporations, municipalities, and governments, can issue them.