Investing 101

## TL;DR

- Fixed Income refers to securities that pay a fixed amount of interest at a fixed time - such as government and corporate bonds, and includes the broad class of interest-bearing securities like swaps
- Fixed Income instruments provide known future cash flows at a specific date (maturity). 
- Such investments are less risky but also provide a lower return

## What is Fixed Income? 

As the term says, fixed income encompasses securities that pay a fixed amount of interest at a fixed time to an investor/holder of a fixed income security. The investment horizon of a fixed income security is called “time to maturity” and at maturity, investors are repaid their entire initial investment, in addition to the interest they received on the initial investment. Unlike equity, where the future payments are unknown, fixed income securities provide a steady flow of fixed cash flows based on interest rates or dividends, which are both known in advance. 

In the event of a bankruptcy, fixed income investors receive priority over common stockholders for repayment. Hence, investing in fixed income securities are less risky but provide a lower return than equity investments. The most common types of fixed incomes securities are government and corporate bonds. 

## What is a Bond? 

Similar to how a company introduces equity to aid their business operations, companies and governments issue debt securities to finance operations. A bond is a debt security and type of fixed income security that pays the holder their initial investment amount, with interest, on the maturity date. 

_Example: Armenak buys a corporate bond from ABZ Bank. They issue a $10,000 bond with a 10 year maturity at 5% “coupon rate.” So Armenak must first pay the bank $10,000 to buy the bond. After that, he will be paid interest payments overtime (aka coupon payments), on an annual basis and calculated like this: $10,000 * 5% = $500 every year for 10 years. At the maturity date, Armenak will receive his initial $10,000 investment. Therefore, in total, Armenak would have made $5,000 from 10 yearly coupon payments of $500 each and the repayment of his initial investment._

Seeing as the above mentioned example is in regards to a corporate bond, Armenak received a higher coupon rate than if he would have bought a government issue bond. This is because a corporate bond entails some risk and therefore investors must be compensated extra for that additional risk. On the other hand, a government bond is backed by the guarantee of repayment by the government (pretty credible source right). 

On top of the difference in cash flows, another difference between a bond and stock is that a bond does not entail any form of ownership in the parent company. 

Securities that pay a fixed amount of interest at a fixed time to an investor/holder of a fixed income security.

What is Fixed Income?

Types of Assets

## TL;DR

- Currencies are...well, just that: cash, for any given country
- FX refers to the exchange rate between two currencies, like EUR vs USD
- The currency market (aka foreign exchange) is known as the largest and most liquid financial market in the world.
- Foreign exchange markets run 24 hours a day 

## What is currency and FX? 

A currency is the official means of payment in a country (USD in the United States) and the currency market entails the exchange of global currencies. Each currency has an exchange rate: its value relative to another currency. For example: the current exchange rate between the Indian rupee and the US dollar is 0.014. That means 1 Indian Rupee is the equivalent of 0.014 USD. The USD is the most commonly used benchmark currency, so the majority of currencies around the world are quoted against the US Dollar. 

FX refers to the foreign exchange market, a global over-the-counter market for trading global currencies. If you want to take a trip to India from the US, you must exchange USD to INR through a currency house which will buy your USD and give you INR, based on the currency exchange rate. Now if you scale this into the millions of other transactions occurring at the same time, you’ll understand why the daily volume for forex is in the TRILLIONS - facilitating global trade and business. 

An investor can gain a profit through the forex trade by making the difference between currency interest rates in different economies. An investor can buy the currency with the higher interest rate and short the currency with the lower interest rate. 

What are Currencies?

TL;DR

What is currency and FX?

What is Fixed Income?