Fixed Income

Who broke it? And then...uh...never mind.

Think: fixed. As in a gaze or something Krazy-glued. It doesn't change; it's the same. And “fixed income” can have two meanings, depending on whether we’re talking about retirement income or financial markets.

For retirees, fixed income from things like Social Security, annuities, or pensions is “fixed” because they are paid on a schedule, and the amount of each payment is the same. Yes, a paltry amount, more or less forever. (Exception alert: Social Security payments are, of late, adjusted according to cost of living.)

In the more common parlance of financial markets, “fixed income” is not about pension payments; rather, it's about paying regular and fixed amounts of money to investors who have purchased debt securities that have a coupon. That is, Joe Investor paid $1,000 for a fixed income security or bond with a 7% coupon; it pays $35 twice a year, until it then pays back its principal of a grand...and investors wave bye.