Most Americans don't know what fixed-income investing is: study

Valentina Caval

A staggering 92% of Americans don’t know what fixed-income investing actually is, according to a new report from BNY Mellon Investment Management.

The online survey, of just more than 2,000 adults, showed that Americans admit to having little knowledge about various fixed-income markets and how to invest in them.

“Most investors really don't get how to use fixed income, why to use fixed income, and that it's something that is suitable over the lifespan of an investor,” Liz Young, BNY Mellon Investment Management director of market strategy, told Yahoo Finance’s On the Move.

The survey found fewer than one in 10 Americans can correctly define fixed-income investing.

“I think the name fixed income is a little bit misleading because, there is a coupon that's typically paid on the bond,” Young said. ”Fixed income is really lending a company money, or lending a government money.”

Two-thirds of investors surveyed believe that investing in equities "requires more knowledge and skill" than fixed-income investing. Almost 30% believe fixed-income investing is intended only for retirement planning and nearly half express they do not know at what point in time the average investor should consider adding fixed income to their investment portfolios.

Why fixed-income investing?

There are several reasons investors should look to fixed-income investments.

“What fixed income does, if used properly in a portfolio, is offset some of spikes in volatility,” Young said. “So, if equities are down, what you want to see is your fixed income piece actually turn around and kick out a positive number.”

Fixed-income investing takes risk factor down in the portfolio overall because of a correlation benefit, Young added.

“On top of that, if you're investing in certain sectors, if there is an investment grade sector and some high-yield sectors, you can get a nice income stream, which, as we all know, has been hard to come by these days,” she said.

Valentina Caval is a producer for Yahoo Finance.

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