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Disclaimer : Anything mentioned in this post is not financial advice and is for informational purposes only. We do not recommend buying or selling any securities that are mentioned in this article. All investments carry risk and there is no guarantee of profit nor protection against loss. WealthGap does not provide any legal, tax, or accounting advice.
Fixed income products pay a fixed dividend or income until maturity date. Currently, bank CDs offer less than 1% APR, which means you make less than 1% a year if you made that investment. You may think you are making still making money, albeit very little, but in real terms you are losing money. The 1% interest payment is a nominal return and in reality there is inflation for goods and services in a healthy economy. When you subtract the nominal return of 1% by an average inflation rate of 2% you are actually losing 1% a year by putting your money into a CD account.
Bonds
Governments and companies issue bonds from time to time and each bond has a different yield. I won't bore you with the details because bonds are boring, but the key concept I want you to take away from here is that the safer the issuer the lower the bond yield. That means, if Apple issues a bond it would offer a much lower yield than a company like GameStop. :) The consensus is that government bonds are the safest and thus they offer the lowest yields. I disagree. Government bonds are horrible investments and they are not as safe as you think. Currently, the 10 year US Treasury Bond is offering 1.64% yield which gives you a negative real return. When the Central Bank prints money and increases the money supply in the financial system it will create inflation, which will decrease your money's purchasing power. Sure they'll pay you the interest but when you get your money back your money is worth less.
Takeaway
If you are not a professional working in the fixed income group at a financial institution, just don't buy any fixed income products. Buy quality stocks and hold on to them.