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The COVID-19 pandemic has been a reminder for many Australians
of the dangers of relying too heavily on any single source of
income. Many have lost jobs, had their working hours cut or seen
once-dependable investment income streams suddenly disrupted.
The 2020 dividend drought has particularly impacted
older investors and self-managed super funds who often rely on
income from blue-chip share portfolios, because many large
companies have been forced to cut distributions in order to
conserve cash.
During the 2020 reporting season, shareholders in Commonwealth
Bank saw payouts fall by more than half compared to last year,
Switzer Daily
17 December 2020
For
investors, fixed-income holdings such as bonds can offer many benefits
including lower risk, stable income streams and an opportunity to diversify
their portfolio.
However,
investors who are new to the world of fixed income often find bonds hard to
comprehend, in part because they have their own unique terminology.
Understanding this can help to demystify the world of fixed income, so here’s a
quick introduction to some of its most commonly used expressions.
When you
buy a bond, you are lending money to an institution such as a company or a
government. You become a