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Fixed-income investments in Australia

Compare managed funds, term deposits, and trading platforms to invest in fixed income.

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Fixed interest or fixed income is a type of investment that offers regular set returns over a specific period of time. The idea of fixed interest is that your rate of return is known, so unlike when you invest in stocks or most other kinds of investments, your wealth doesn’t fluctuate or fall.

For this reason, fixed-income assets are often seen as one of the safest forms of investing. Common fixed-income assets include government bonds, company bonds, cash and gold.

How to invest in fixed income

First, it’s important to understand that fixed income encompasses many different kinds of products. Even if a fund has labelled itself as being “fixed income” or “fixed interest”, it does not mean that your returns are guaranteed or that your money is safe from market volatility.

Fixed-income products also differ broadly in terms of risk and performance. While fixed-income products offered by the banks, such as term deposits, have a safety guarantee of up to $250,000, non-bank products broadly categorised as “investment funds” have no such guarantee and are regulated entirely differently.

Examples of products that are commonly classified as fixed-income investments are outlined in this guide below:

See below to read more about the different benefits and risks of fixed-income investing.

Peer-to-peer lending for investors

Peer-to-peer (P2P) lending platforms connect everyday borrowers with investors. Investors replace the banks to become lenders while borrowers sign up to the same platform to receive loans.

Investors benefit from loaning their funds through a P2P because they can get a higher return than they normally would by investing in a banking product. Plus, most P2P funds offer fixed returns over a period of several months or years, making these a potentially less volatile option than share-market investing or investing in other kinds of managed funds.

Compare P2P investment accounts

Data indicated here is updated regularly
Name Product Minimum deposit Target return Investment term Available to everyday customers?
Plenti (Investing)
$10
up to 6.3% p.a.
1 month to 7 years
Yes
Plenti is a peer-to-peer lender that connects investors with borrowers.
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Disclaimer: Investments made through a P2P lending platform are not protected and are subject to risks including credit risk (defaults) and liquidity risk. These investments are not subject to review by the Australian Financial Complaints Authority. Actual returns may vary from the Expected Returns declared by the Providers. Read the PDS for details before investing and consider your own circumstances, or get advice, before investing.

What are the pros?

  • Fixed rate. When you invest in a P2P fund, you’re agreeing to a fixed rate of return. So long as the fund delivers on its promise, you’ll know what to expect at the end of the term.
  • Higher returns. Most P2P funds offer higher interest-rate returns than bank products like term deposits or savings accounts.
  • Potentially less risky. Although risk level varies enormously across P2P products, they tend to be less volatile than stocks and many are considered far safer.

What are the cons?

  • No guaranteed return. Although you have the potential to get a higher return than you normally would with a term deposit or savings account, there's the possibility of losing your money if a borrower defaults.
  • Credit ratings. P2Ps sometimes categorise funds as low risk or high risk, but to date, there is no regulated standard across operators, which makes it difficult to compare funds.
  • Exiting the fund. Like a term deposit, you’re locked into the fund for a set duration and you can expect penalties should you choose to exit before the term ends.

For more about the pros and cons of this type of product, you can read our comprehensive guide to peer-to-peer investing.

Invest in term deposits

A term deposit is a banking account in which funds are locked down for a specified period of time. In return, the issuing financial institution rewards you with interest on your money at an agreed-upon rate. It's considered one of the safest options available to investors.

Because the interest rate is fixed, you know exactly how much your pool of money will have grown by at the end of the term. Once the term ends, you can withdraw the money or reinvest it. The down side is that if you choose to withdraw your funds early, there’s usually a cash penalty applied.

For more information on bank products, you can read our comprehensive guide to term deposits and high interest savings accounts.

Compare term deposits

Data indicated here is updated regularly
Name Product 3 Mths p.a. 4 Mths p.a. 5 Mths p.a. 6 Mths p.a. 7 Mths p.a. 12 Mths p.a. 24 Mths p.a.
MyState Bank Online Term Deposit
0.65%
0.60%
0.60%
0.65%
0.65%
0.90%
1.00%
Single or joint account-holders can apply online with MyState's online application process.
Pay no account setup or ongoing fees and choose a term length between 3 months and 2 years, with interest paid at maturity.
Citibank Term Deposit $10,000
0.55%
-
-
0.55%
-
0.55%
-
Suited to customers with deposits between $10,000 and $249,999.
This term deposit is for new Citibank customers only
Citibank Term Deposit 250K
0.90%
-
-
0.90%
-
-
-
A short-term investment option with a guaranteed rate of return.
Suited to customers with deposits over $250,000.
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What are the pros?

  • Fixed rate. You’re agreeing to a fixed rate of return, so you know exactly what you’ll get at the end of the term.
  • Very low risk. There are few options safer for your money than a term deposit. There is no market volatility and little or no risk of losing your investment.
  • Guaranteed protection. Term deposits through a bank are guaranteed by the government to the amount of $250,000.

What are the cons?

  • Lower returns. The fixed-rate returns are typically lower than with other investment products.
  • Exiting the fund. You’re locked into the fund for a set duration, and you can expect penalties if you choose to exit before the term ends.

Invest in bonds

When most people think of fixed interest, they think of the bond market. A bond is a contract where you lend money to a business or government. In return, the organisation promises to pay you back at a fixed rate of interest.

Bonds are considered to be one of the safest assets you can invest in. So long as the organisation issuing the bond doesn’t collapse, there’s little chance that you’ll lose your money. For this reason, government and blue chip company bonds tend to be a safe bet, but there are exceptions.

Investing directly in the bond market typically requires a high minimum investment of around $500,000. Those looking to invest less can buy units in bond-managed funds, ETFs or exchange-traded bonds.

Compare trading platforms to access exchange traded bonds

Data indicated here is updated regularly
Name Product Standard brokerage fee Inactivity fee Markets International
IG Share Trading
Finder Award
IG Share Trading
AUD 8
AUD 50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares, Forex, CFDs, Margin trading
Yes
Brokerage discount: $5 on Australian shares for active traders & $0 commission on US and global shares
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, forex and CFDs, plus get access to 24-hour customer support.
eToro Share Trading (US stocks)
USD 0
USD 10 per month if there’s been no login for 12 months
Forex, CFDs, US shares
Yes
Zero brokerage share trading on US stocks with trades as low as $50.
Note: This broker offers CFDs which are volatile investment products and most clients lose money trading CFDs with this provider.
Join the world’s biggest social trading network when you trade stocks, commodities and forex from the one account.
CMC Markets Stockbroking
AUD 11
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, mFunds
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, managed funds, forex, commodities and cryptocurrencies, plus access up to 15 major global and Australian stock exchanges.
ThinkMarkets Share Trading
AUD 8
No
ASX shares, ETFs
No
Fast sign-up: Start trading in just a few minutes
Switch between your ASX share trading account and your forex account on your mobile and access some of the lowest brokerage fees on the market with a flat $8 commission (until $200,000).
ANZ Share Investing
AUD 19.95
No
ASX shares, Global shares, Margin trading, Options trading
Yes
Earn 1 Qantas Point per AU$3 spent on brokerage fees on certain instruments.
Access Morningstar reports, company announcements and and live pricing via ANZ’s share investing platform. Available for desktop and mobile.
Westpac Online Investing Account
AUD 19.95
AUD 63.50 per year on the global markets account
ASX shares, Global shares, Options trading, US shares
Yes
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Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares.

What are the pros?

  • Fixed rate. When you invest directly in bonds, you know exactly what return you’ll get at the bond’s maturity rate.
  • Low risk. Investment-grade bonds are considered one of the safest investment options available.
  • Returns. The investment returns that you get from some bonds are higher than what you can expect from some term deposits or savings accounts.
  • Regular income. When you invest in bonds, you receive income in the form of coupon payments on a regular basis.

What are the cons?

  • Lower returns. Bonds typically offer lower returns than what you can potentially get from share trading and some investment funds.
  • Exiting the investment. In most cases, you’ll be penalised for exiting before the maturity date.
  • High investment. Bonds typically require a minimum investment of around $500,000.

Fixed-income funds and ETFs

Today, there are many managed investment funds, listed investment trusts (LITs), listed investment companies (LICs) and ETFs that offer access to fixed-interest assets.

Investment funds are a portfolio of assets that can include shares, bonds, cash and derivative products. These funds are managed by a group of investment professionals who decide which assets the fund will hold or which index it’s tracking.

Some of these funds offer fixed income in the form of dividends, and others benefit from the rising demand for bonds or cash as an asset class. It’s important to understand that although they may hold fixed-income assets, they might not offer fixed-interest payments or maturity dates.

Investment funds come with different rules, requirements and risks that are at the discretion of the issuer. Many of these products are complex and require expert advice. For more information on these, you can follow the links to our guides:

Compare trading platforms that offer managed funds

Data indicated here is updated regularly
Name Product Standard brokerage fee Inactivity fee Markets International
CMC Markets Stockbroking
AUD 11
No
ASX shares, Global shares, Forex, CFDs, Margin trading, Options trading, mFunds
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, managed funds, forex, commodities and cryptocurrencies, plus access up to 15 major global and Australian stock exchanges.
nabtrade
AUD 14.95
No
Yes
Trade local and international shares with your nabtrade account and earn up to 2% interest on your integrated cash management account.
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Important: Share trading can be financially risky and the value of your investment can go down as well as up. Standard brokerage fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares.

*Brokerage fees shown are for standard share trading, see below for a list of mFund fees.

What are the pros?

  • Higher returns. There’s the potential to get a higher capital return than traditional bond investing.
  • Liquidity. Funds listed on a stock exchange can offer high liquidity.
  • Flexibility. Fixed-interest funds have options to suit a broader range of investors than direct bond investing as they can hold any number of securities.
  • Cost. It’s possible to invest in bond funds for as little as a few hundred or thousand dollars, rather than $500,000 for direct bond investing.

What are the cons?

  • May not have set return. Investment funds have their own rules around interest payments, and this may not be fixed as with other income products.
  • Transparency. Investment funds, LICs and LITS may hold any number of assets, including risky derivative products, and these do not always need to be reported immediately. This means investors may not know exactly what they’re investing in.
  • Uncertain return. There’s no guarantee that you’ll receive the return that you hope for as the fund’s value may fluctuate depending on market demand.

Invest in hybrid securities

Hybrid securities are contracts issued by companies, banks or insurers that have both debt and equity features. They may also be referred to as convertible bonds, capital notes, subordinated notes and convertible preference shares, depending on the contract and issuer.

Although these securities behave similarly to bonds, they can be far riskier and are sometimes classified as “growth products” rather than “fixed-income products”.

They typically work by paying interest to investors for a specified period of time, and they’re oftentimes listed on a stock exchange and traded like shares. This means the market price may be volatile and an investor risks losing money if it falls below the buying price.

Unlike bonds, there’s enormous flexibility on the issuer’s part, which can make the products riskier or complex for investors. For example, some hybrids allow the issuer to cancel the deal, suspend payments or convert the securities into shares as they choose.

What are the pros?

  • High returns. As with other kinds of risky investments, there’s the potential to earn a higher return on investment than with bonds.
  • Volatility. Their price is typically less volatile than shares.
  • Income. Hybrids typically offer regular income payments that may include franking credits.

What are the cons?

  • Unsecured investment. They may be unsecured, which means you risk losing your investment entirely should the company become insolvent.
  • Market and interest rate volatility. If the fund falls below the price you paid for it, you risk losing money while interest rates changes can also impact the hybrid's value.
  • Liquidity. The market for hybrids is smaller than shares, which means it may be harder to sell for a competitive price if demand falls.
  • Income not guaranteed. Investors may not be paid an income or have their payments deferred for months or years, depending on the contract. This may be due to legal changes, corporate losses or other reasons.

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