How To Earn Wealth thru Fixed-Income Assets

Earning in fixed income from corporate bonds, treasury bills, and other paper assets that have fixed rates and returns is one of many secrets of wealthy people to preserve their wealth.  Many of high-net-worth individuals and artificial entities such corporations earn tremendous income thru fixed income assets.  Let me walk you thru that:

What are Fixed Income Assets?

Fixed income asset simply a paper asset that has legal obligation to pay the investor or trustee a fixed amount in a certain period of time.  A fixed amount is thru fixed-rates and paid annually.  Any fixed income is subjected to 20% withholding tax, unless placed in a certificate of deposits for 5 years.

How to Earn Wealth in Fixed Income Assets?

There are many fixed-income assets to be considered first before jumping into buying an investment.  Take a look these first:

  1.  Corporate Bonds – bonds simply a debt from a corporate entity.  The issuing company (a company who issue bonds) would like to sell bonds or “debt”in order to finance projects, expansion, or for preserving their capital.  The issuing company also obligated to set certain interests to owner of bonds within period of time.
  2. Treasury Bills  (T-bills) – A bond that issued by Bureau of Treasury (National Government).  Same with corporate bond, the government will be obligated to pay investors fixed rate in certain period of time.
  3. Preferred Shares  – Unlike bonds or T-Bills, preferred shares are equities.  A piece of ownership in a company but with fixed-interests rate to be given to all holders of their preferred shares, and plus capital appreciation upon selling of shares.

Let set an example:

Ador bought a PHP100,000.00 worth of corporate bonds of Petron Corp. with a fixed interest rate of 4.62% annually for seven years, to be paid quarterly.

Ador will be earning (net of tax) of PHP3,696.00 every year, or every quarterly of PHP924.00 for seven years.

In seventh year, Ador will get-back his PHP100,000.00 placement plus total interests he was received of PHP25,872.00 

Ador will be having a total investment portfolio of PHP125, 872.00 earned from corporate bonds.

Imagine, what if Ador has PHP500,000.00 and placed it in corporate bonds? Not bad at all….

Conclusions…

Instead of placing your money in turtle-like instrument such Time Deposits, try to invest in bonds or in any fixed income that we already tackled and reviewed.

Bonds earned much more return and yield comparing to any time deposit products.

Treasury Bills or T-Bills considered the safest form of bonds, due the government only will print money in order to pay interests to all it’s investors or creditors.

For more details in latest bond issuance, please read these links:

Philippine Dealing System (PDEX) Listed Corporate Securities 

Asian Bonds Online

or visit your favorite bank…

Diversify your investment portfolio.  A mixture of equities, fixed income, insurance, and active income will promote wealth and help you to achieve your financial goal.

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Eleison Cruz

Financial Consultant. Personal Finance and Investment advocate. Author of The Good Asset, a blog that educates people in investments, financial literacy, and life insurance. Visit www.thegoodasset.ph

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