Question

Suppose one of your dreams is to be an investor with fixed income and variable income securities. What important aspects must be taken into account in each case (fixed income and variable income) to build a personal investment portfolio.

Answer 1

If I am an investor with both fixed income securities and variable income securities then, important aspect which must be taken into account in each case to build a personal investment portfolio would be as follows-

Factors which should be taken into consideration while maintaining the portfolio of fixed income securities would be as follows-

A. These security will be generally offering low rate of return but they will be having an uniform rate of return.

B. These securities will also be having a lower rate of risk than the variable securities and this will be rated by various credit agencies through credit rating.

C. fixed income securities are generally for a low-risk investor and who is wanting a higher rate of return and it is offering with the high degree of diversification.

D. Bonds will be the most common type of fixed income security but there would be other fixed income securities like commercial deposits and money market and preferred shares at well.

E. This will be highly secured in a financial downturn when the share markets are crashing because this will be offering a high degree of safety at those adverse economic cycle.

Factors that should be considered before making a Portfolio through variable income securities are as follows-

A. Return of the security will generally be variable in nature and they can never be predicted in advance.

B .risk associated with the securities will be generally higher than fixed income securities and these are preferred by a risk loving investor

C.this variable income securities will be offering investors with unlimited upside growth and this will be coming at high risk and this can even be leading loss of complete capital.

D. Investors who are demanding a higher rate of return will be selecting variable income securities

E. Variable income securities will mostly be including the common stocks but variable rate demand obligation and floating rate notes are also different type of variable securities that will be included in the portfolio by these investors.