Interest income securities are investments that provide a predictable, stable income to investors. As a definition, income securities provide a stable income to investors over a predictable time frame, with a high likelihood of repayment and liquidity. We have segregated these investments from our corporate paper investments in order to reclassify the risk profile.
Government treasuries represent one of the lowest risk investment options for investors. Geopolitical considerations will define how those governments will rank as a risk globally, but within a country, are still considered low risk for the population living within that region due to the fact that a government's primary income stream is taxes (on top of the fact that government's directly influence fiscal and monetary policy).
Bank deposits also typically represent lower risk investment as they are heavily regulated by government central banks and subscribe to rule and regulations set forth. They have to maintain strict policies to protect stakeholders, but still represent a slightly higher risk than government treasuries due to their limited access to revenue streams (by comparison to governments) and fierce competition within the sector.
Unit trusts are investment securities issued by fund managers that provide a stable income, flexible liquidity terms and a diversified investment approach. They are regulated by government market security authorities that set guidelines as to how they invest, function and report. They will typically have strategies that set limits as to how much a unit trust can invest in any particular security, asset type or sector, but are ultimately at the discretion of the fund manager, which inherently make these investments slightly higher risk than government securities.
The risk profile helps you determine the risk/reward element of the investment. In this category, risks are generally considered low and investment in these securities usually forms the foundation of a diversified portfolio.
Note: It is recommended that investors diversify their portfolios and seek professional advice before investing in securities.
Interest income Options