Fixed Income Investments - Friday April 29, 2011

Despite what most people think, fixed income investments are not risk free. Some risks to consider are inflation risk, tax risk and renewal risk. Market risk is applicable in bonds and GIC's if you want to sell them before maturity. Generally speaking if you hold them to maturity you will receive both you principal and interest you are promissed. Bonds and GIC's are the least effective investments when dealing with inflation, tax or renewal risk. Laddering and diversification are two commonly used startegies to reduce these risks.