5 Key Factors to a Fixed Income Investment

Investing in fixed income assets is a strategic approach to diversify your investment portfolio and secure a steady stream of income. Whether you're a seasoned investor or just starting out, understanding the key factors that influence fixed income investments can significantly impact your outcomes.

Whether you're looking to mitigate risk, achieve stable returns, or simply understand more about the fixed income market, this post is your gateway to mastering the complexities of fixed income investing.

1. Yield and Risk: Investors often have to walk a tightrope between their desired yield and risk, which is a much more visible risk decision than equity investors. The higher the yield, usually the higher risk, as an issuer increases yield payments to compensate investors for the heightened risk that they are participating in. If an issuer is confident the issue might be oversubscribed, they could consider offering slightly lower yields for future investment issues. The actual risk can be influenced by these other key factors below.
2. Credit Quality: Credit quality is the question if an investment issuer can go bankrupt. It’s often glossed over by some investors but is always asked by investors who remember going through a painful bankruptcy proceeding. Seeking out higher credit quality issuers, or entering an investment at the top of the creditor pecking order can make investors feel more comfortable. Remember that debt secured to a particular hard asset is at the top of the order, as these investors can repossess or sell off an asset in order to be quickly made whole. If investors are exploring debt opportunities for the first time, they should not stray far from their usual risk level. Always understand a potential disaster bankruptcy scenario so that you can hope for the best, and prepare for the worst before committing to an investment. 
3. Time Horizon: Most investors need to be reminded of the bigger picture of their retirement accounts, that money will typically not be touched until they are 59 and a half. So when evaluating an IRA investment, there are no limits to the time horizon other than how comfortable you are in investment and when your retirement goals might change. Having the comfort to commit to longer time horizons might allow you to go after higher yields without drastically changing risks in credit quality, liquidity, or diversification. A long-time horizon investment might protect by providing returns while other investors struggle to find good deals to reinvest in a tougher investor environment. When trying to balance out your risk assessment, remember that a number of unknowns can develop exponentially over time and change the environment for your investment. 
4. Liquidity: Liquidity refers to how quickly and easily an investment can be sold without taking a massive haircut on price. In the world of alternative investments, equity investors sometimes feel intimidated by a sharply different standard of liquidity. Some of the markets for popular fixed-income securities, some fixed-income securities, such as Treasury bonds, are highly liquid, while others, like municipal or corporate bonds, maybe less so. Real Estate and real estate debt is generally thought of as illiquid compared to equity, but in-demand real estate can be sold quickly in a few days, weeks, or months, while out of favor real estate can wait years for the right buyer. As long a real estate property is producing income to your investment terms, that can soften the blow of waiting for an extended period for a sale. Some investments can only be redeemed by the issuer, others only by other private investors. Alternative investments are more relationship-based than public markets, and another investor who values the deal can be a one-person market when there is no rush of other buyers.
5. Diversification: Diversification is a risk management strategy that involves spreading investments across various equity or debt to reduce exposure to any single asset or risk. In the context of fixed-income real estate investments, this could mean diversifying across different types of equity or debt, different sectors inside or outside real estate, and different geographical regions. Diversification helps mitigate both issuer-specific risk (the risk that an individual issuer will default) and real estate market risk (the risk that the entire).

Investing in fixed income assets requires a nuanced understanding of yield and risk, credit quality, time horizon, liquidity, and diversification. Each step is crucial in creating a resilient and profitable investment portfolio. By balancing these elements, investors can navigate the complexities of the fixed income market to achieve their financial goals. Rocket Dollar account holders have the tools and flexibility to explore and integrate fixed income assets into their retirement accounts. Whether you're aiming for stable returns, seeking to mitigate risk, or diversifying your investment strategy, a Rocket Dollar account empowers you to harness the full potential of fixed income investments.

Mid Atlantic Secured Income Fund LLC is a private placement debt fund designed for investors who are tired of the stock market volatility and the over promises of risky venture and equity funds. The Fund's investment objective is to provide a defined return of high current income while seeking to preserve shareholders' capital through investment in a professionally managed portfolio of income-producing secured debt obligations.