Fixed and variable income
Investing is an excellent way to make money grow. However, it is essential for investors to know where they are putting their money and what possible risks are involved. Know the advantages and disadvantages of investing in fixed income and variable income, two popular investment options.
Characteristics
Popularity
Although fixed income is considered a safe investment, there is always a credit risk involved, that is, the possibility that the issuer will not pay the interest or principal borrowed.
Risk
Fixed income presents a low risk, as the interest rates are known from the beginning, allowing the investor to calculate its return accurately.
Flexibility
Fixed income can be less flexible than other types of investments, such as variable income, as there are often restrictions on the minimum investment term and early withdraw.
Profitability
Fixed income has a lower return compared to other higher risk investments such as stocks.
Inflation
Fixed income may not be a viable option in periods of high inflation, as interest rates may not keep pace with inflation, resulting in a loss of purchasing power.
Taxes
Fixed income may be subject to high taxes, depending on the country and tax laws.
Characteristics
Popularity
Popularity has grown significantly. This is partly due to the low yield offered by fixed income investments, which have been affected by low interest rates in many countries.
Risk
Equity income can offer very high profit potential, it is important that investors control the risks involved. Investing for the long term can help reduce the impact of short-term fluctuations.
Flexibility
It offers high liquidity, allowing investors to buy and sell their shares easily in the market without significant time or price constraints.
Profitability
Variable income has the potential to generate much greater profitability than fixed income.
Inflation
It has the potential to protect against inflation, as stocks tend to rise in price.
Taxes
Gains obtained from investments in variable income are subject to tax, which is calculated based on the net income obtained.