How does a monthly income fund work?

How does a monthly income fund work?


One of the keys to investment success is diversification. Before going into it in future articles, it is necessary for you to know one of the assets that investors use to diversify their portfolios, and it is none other than fixed income.  Although in any financial environment you will continually hear more and more about equities, for example in this blog, there is one thing you should know.  The fixed income market is the largest securities market in the world in terms of the value of its assets. Therefore, we must keep it in mind when investing our savings.with today’s post I want you to know the most important aspects of fixed income. If after reading this article you have an idea of what fixed income is, how it relates to market interest rates and what role it can play in an investment portfolio, I am satisfied.  Especially if the relationship between fixed income and interest rates has been made clear to you, what a mess I used to make when I first became interested in fixed income!

How an investment fund works

This Fund has a high investment risk associated mainly with market risk, especially interest rate risk, since the characteristics of the securities in its portfolio are subject to upward and downward fluctuations in the markets in which they are traded, so that when changes occur, they may reflect positive or negative variations in the price of the Fund and consequently generate losses in the investment originally made.

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The Fund may be purchased daily with 72-hour settlement and the execution of a sale order of this Fund will be made on the first Monday of each month; in the event of a non-business day, it will be executed on the following business day.

Federal Treasury Certificates. They are issued by the Mexican government in pesos and are acquired at a discount price, i.e. below their nominal value of $10. The gain obtained is the difference between the price paid upon acquisition and their nominal value at maturity. Cetes have available terms of 28, 91, 182 and 364 days.

Types of investment funds

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Investment Funds

Depending on the fund’s investment policy, its level of liquidity and portfolio turnover, it may invest in short (money market), medium and long term (capital market) fixed income assets.

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These are the institutions in charge of giving a rating to a multitude of companies, financial assets, etc. This note is known as Rating or credit rating, and measures the payment capacity of the company or asset in question.

These, as we said, play a fundamental role. This is because the variation from one rating to another, or even from investment grade to junk bond (high yield), means that the fixed income funds that invest in these assets have to sell those assets. All this, because they do not comply with their investment policy.

The fund aims to generate income by maintaining and increasing its original investment. It invests primarily in a range of fixed income securities (which are loans paying a fixed or variable rate of interest) issued by companies or governments around the world, which provide a steady and increasing level of income. The fund may also invest up to 50% in securities with lower ratings of “Baa3” or lower, assigned by these same agencies.

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