Stock Market

Maybe you're not the type that likes to take big chances. You like to know what's coming around the corner, and, if you can't, you at least like to have a back-up plan to deal with life's little boomerangs. If this is you, there are two words you need to remember: fixed income. A fixed-income security entitles you to regular, fixed payments of interest income on your investments.

Bonds and notes are fixed-income securities that corporations, municipalities, and governments issue to borrow money. When you buy a bond or note, you are agreeing to lend the entity that issued it a certain amount of money. In return, the company gives you a fixed-income security and promises to make specified interest payments to you and return the full amount borrowed when the security matures. The interest that is to be paid to you, the timing of those payments, and the maturity date are all spelled out in a document known as the indenture.

When corporations raise money using fixed-income securities, it's called debt financing. When they issue stock to raise money, it's called equity financing. It may surprise you to learn that, although the stock market receives more coverage on the nightly news,