Income Generating Investments and Products - Fidelity
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Fixed income generally refers to investments that promise to pay interest or a return on your initial investment. However, other investment products may also provide income. can vary because of increases or decreases in the share price. Preferred stocks Preferred stock is distinct from common stock and is not offered by all companies. Preferred stocks offer dividends that aren’t guaranteed but must be paid before dividends are paid on common stock. As with bonds, preferred stocks have various terms and features that vary from one preferred to another and can impact the expected future income. Fixed-rate capital securities (FRCS) These hybrid securities combine the features of corporate bonds and preferred stock. FRCS carry the of the and generally have a stated . A commonly seen risk to their income-generating promises is their ability to defer or suspend payments in the event the issuer experiences financial difficulties Equity income funds These funds invest primarily in shares of companies that pay a dividend and can offer an attractive yield, while also providing the potential for conservative capital appreciation. Companies that pay dividends tend to be higher quality, mature businesses, with stable cash flows. Asset allocation funds These funds offer diversification across multiple asset classes, including domestic and international stocks across varying styles and market capitalization ranges, investment grade and high yield fixed income, and short-term investments. Fidelity also offers seven Fidelity Asset Manager funds, with equity exposure ranging from conservative (20%) to aggressive growth (85%). Fidelity Simplicity RMD FundsSM Take the guesswork out of required minimum distributions (RMDs)1 by pairing a professionally managed, age-appropriate asset allocation fund with our automated annual RMD withdrawal service. Fidelity Defined maturity funds (DMFs) These funds are an innovative way to invest in municipal bonds. Like Fidelity's other municipal bond funds, DMFs offer professional management, diversification, and seek to provide federally tax-exempt income.2 Unlike traditional bond funds, a DMF's price sensitivity to changes in interest rates declines gradually over time, approaching zero near the fund's target end-date.3 Strategic funds Fidelity Strategic Funds are multi-asset-class strategies that seek to address key income needs—bond income from global sources, non-bond income, and real return—by investing in a diversified mix of and/or equity investments chosen for their historical combined performance. Closed-end funds (CEFs) These funds invest in a variety of securities, much as you would with conventional open-end mutual funds. However, unlike open-end mutual funds, CEFs trade and are priced intraday—like stocks on an exchange—at prices determined by buyers and sellers. Next steps
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Gain a deeper understanding of fixed income and bonds. 1. RMDs do not apply to investments in Roth IRAs or taxable accounts. 2. Although municipal funds seek to provide interest dividends exempt from federal income taxes, outcomes cannot be guaranteed, and the funds may generate some income subject to these taxes. Income from these funds is usually subject to state and local income taxes. Generally, municipal securities are not appropriate for tax-advantaged accounts such as IRAs and 401(k)s. The municipal market can be affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities. 3. To take advantage of this expected decline in price sensitivity, investors should consider holding the funds to their end dates. Otherwise they may experience more price, or net asset value uncertainty. In general, the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible. Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal. Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully. 625682.2.0 Footer
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creditworthiness
measurement of the risk of default of an individual fixed-income security or the issuer of a fixed-income security; generally measured by one of the major ratings agencies fixed income
a type of asset class in which the investments provide a return in two possible forms; coupon paying bonds have fixed periodic payments and a return of principal; zero coupon bonds are sold at a discount, do not pay a coupon, and have a return of principal plus all accumulated interest at maturity interest
the amount paid by a borrower to a creditor, or bondholder, as compensation for the use of borrowed money issuer
a government, corporation, municipality, or agency that has issued a security (e.g., a bond) in order to raise capital or to repay other debt; the issuer goes to an underwriter to get their securities sold in the new issue market; for certificates of deposit (CDs), this is the bank that has issued the CD; in the case of fixed income securities, the issuer of the security is the primary determinant of the security's characteristics (e.g., coupon interest rate, maturity, call features, etc.) maturity maturity date s
the date on which the principal amount of a fixed income security is scheduled to become due and payable, typically along with any final coupon payment. It is also a list of the maturity dates on which individual bonds issued as part of a new issue municipal bond offering will mature yield
the percentage of return an investor receives based on the amount invested or on the current market value of holdings; it is expressed as an annual percentage rate; yield stated is the yield to worst — the yield if the worst possible bond repayment takes place, reflecting the lower of the yield to maturity or the yield to call based on the previous close