Fixed Interest Investments
A fixed interest investment is where you lend someone money, and they pay you a set amount of interest and agree to repay you at a certain time.
There are many different types of fixed interest investments, including bonds, term deposits and debentures. The organisation issuing the investment is called the issuer. Governments, banks, finance companies, credit unions, building societies and companies all offer fixed interest investments.
The risks associated with each of these types of issuers varies. Government bonds are generally considered to be the lowest risk investment.
Generally, the higher the risk of an investment, the higher the return should be. But be aware that sometimes the return being offered may not adequately reflect the risks of the investment.
Some issuers of fixed interest investments may be independently rated by credit rating agencies. Investors should not make a decision to invest in fixed interest securities based on the advertised rate alone. An assessment of the credit-worthiness of the issuer is another important consideration.
Some fixed interest investments can be bought and sold on exchanges, including New Zealand's exchange NZX.