When interest rates and inflation reshape investor priorities, investors tend to rediscover the value of fixed-income investments, not just for returns, but for balance. While stocks often dominate headlines, fixed-income tools like bonds, annuities, and CDs can play an important role in many investment portfolios. Fixed-income investments may not receive as much attention as stocks, but they can play an important role in many investors’ portfolios by offering different combinations of interest rates, maturities, liquidity, and credit risk.
In the sections that follow, we break down some of the fundamentals of fixed-income investing, covering common tools like bonds, CDs, and annuities, and highlighting considerations for investors evaluating income-generating options.
Fixed-rate vs. Fixed-income
Although the terms “fixed-rate” and “fixed-income” are often used interchangeably, they are not identical. Fixed-income is a broad category of investments designed to generate income, including many bonds, certificates of deposit (CDs), annuities, and certain preferred securities. Fixed-rate investments are a subset of fixed-income investments that pay a stated rate of interest for a specified period or term. To learn more about how fixed-rate investments work and how they compare with other fixed-income options, see this guide: Fixed Rate Investing in 2026.
Understanding Fixed-Income Tools
Investors exploring fixed income will encounter options like corporate bonds, CDs, and annuities, each with distinct trade-offs in risk, return, and duration. Unlike variable-rate investments, fixed-rate investments pay regular interest or dividend payments at a fixed rate over a set period. Many investors use fixed-income investments to diversify a portfolio and manage certain investment risks. The specific features of each fixed-income investment type can benefit investors based on their personal investment needs and goals.
In this article, prospective investors can learn what fixed-income investments are and the pros and cons of investing in them.
Exploring Options for Fixed-Income Investing
There are multiple types of fixed-income investments that prospective investors should be aware of.
U.S. Treasuries and the Role of Government Debt
Government bonds are debt securities issued by the government to finance its spending. The bonds issued by the U.S. government are considered among the safest investments because they are backed by the full faith and credit of the issuing government. One of the most popular government fixed-income investments is the U.S. Treasury bond. These long-term securities offer regular interest payments and provide for repayment of principal at maturity, subject to the issuer’s ability to meet its obligations. They are commonly used by investors seeking lower credit risk or principal preservation, but as a result, generally offer lower stated interest rates than other fixed-income investments. Historically, the United States has met its obligations on Treasury securities, contributing to their reputation as among the lowest-credit-risk fixed-income investments.
Quick Tip: U.S. Treasury bonds are backed by the full faith and credit of the federal government, making them among the lowest-risk fixed-income investments available.
Investor Insight: Lower stated yields often reflect differences in credit quality, liquidity, maturity, and other investment characteristics. Government bonds may not offer much income, but they’re often used by investors who want to protect their principal.
Corporate Bonds: Higher Yields, Higher Risk
Corporate bonds are among the largest components of the U.S. bond market. They are a type of debt security structured to deliver interest payments during the bond’s term (or life), with principal repaid at maturity. These types of bonds are issued by companies to finance business operations, acquisitions, expansion, or other corporate purposes. Phoenix Energy, for example, issues corporate bonds and notes pursuant to applicable offering documents and applicable securities laws. Like government bonds, corporate bonds generally pay stated interest and return principal at maturity, subject to the issuer’s ability to meet its obligations. The risk level of corporate bonds can vary based on the issuing company’s financial condition, but prospective investors should review the company’s financial statements, applicable offering documents, SEC filings (where applicable), and other publicly available disclosures.
Quick Tip: Corporate bonds generally offer higher stated interest rates than U.S. government bonds, but the level of risk varies based on factors such as the issuer’s financial condition, business, and ability to meet its obligations.
Investor Insight: Investors should carefully review the issuing company’s financial statements, applicable offering documents, SEC filings (where applicable), and other publicly available disclosures. They may also consider the issuer’s historical payment history, recognizing that past payment performance does not guarantee future results or the issuer’s future ability to meet its obligations.
CDs: Bank-Based Fixed Income
Certificates of deposit (CDs) are time deposits offered by banks and credit unions that usually pay a fixed interest rate for a specified term. They are generally available in maturities ranging from 28 days to 5 years, and withdrawing (or redeeming) before the maturity date typically involves paying an early withdrawal penalty or redemption fee. They are considered among the lowest-risk fixed-income investments in terms of default risk because deposits at FDIC-insured banks are generally insured up to applicable coverage limits (i.e., $250,000); however, they are subject to other risks, including interest rate and inflationary risks (as the interest rate could be outpaced by inflation) and are often purchased by conservative investors who want to lock in a fixed rate of return for a set period.
Quick Tip: Most CDs are FDIC-insured, which makes them low risk, but cashing out early could create penalties.
Investor Insight: If rates go up after you lock in a CD, you might miss out on better-paying options. That’s something potential investors should weigh carefully.
Annuities: Income Planning with Insurance Contracts
Annuities are often considered one of the more complicated fixed-income instruments available to investors. In its simplest form, an annuity is a contract between an investor and an insurance company and requires the issuer to make regular payments for more than one year. However, annuities come in many forms, including fixed, variable, and indexed, and can be purchased with a single payment or a series of payments (called premiums). Because annuities can include a variety of fees, expenses, surrender charges, and contract features, prospective investors should carefully review the product’s terms and understand the potential tax implications before purchasing an annuity. Like any investment, whether an annuity is right for an investor depends on the investor’s financial situation, age, health, and goals. Annuities can be right for some people and wrong for others.
Quick Tip: Annuities may provide a stream of income, depending on the contract terms and the claims-paying ability of the issuing insurance company. But make sure you understand the fees and how hard it might be to get your money out early.
Investor Insight: Annuities can serve a purpose in long-term income planning, but investors should take time to understand the product’s fees, tax treatment, and liquidity limits. Because of their complexity, they may not be the right fit for every retirement strategy.
Benefits of Fixed-Income in your Portfolio
Fixed-income investments are considered to have several advantages for investors, depending on the needs of the particular investor, including:
- They offer the potential for steady income, typically at a fixed rate, and may appeal to investors seeking greater predictability over time.
- Many fixed-income investments have historically experienced less short-term price volatility than stocks, although market values can fluctuate depending on interest rates, credit quality, and other factors
- Debt securities generally rank ahead of equity securities in an issuer’s capital structure, although recovery in the event of insolvency depends on the terms of the security, the issuer’s capital structure, applicable law, and other factors.
- Certain fixed-income investments, such as U.S. Treasury securities and FDIC-insured CDs (within applicable coverage limits), are generally considered among the lowest-credit-risk fixed-income investments.
Risks and Trade-Offs to Consider
Fixed-income investments are considered to have several disadvantages for investors as compared to other types of investments, including:
- Historically, fixed-income products have delivered lower historical returns than stocks, a trade-off many investors accept in exchange for reduced volatility.
- Credit risk, including the possibility that the issuer may be unable to make scheduled interest or principal payments.
- Interest rate risk, where rising interest rates may reduce the market value of existing fixed-income investments.
- Inflation risk, where inflation may reduce the purchasing power of interest payments and principal over time.
Phoenix Energy Bonds and Notes: A Fixed-Income Option
Phoenix Energy is an oil and gas company focused on oil and gas exploration and production in the Williston Basin. Phoenix Energy offers corporate bonds and notes with annual interest rates currently ranging from 6% to 13%, depending on the term and structure. For years, Phoenix Energy has offered its corporate bonds to “accredited investors” through private placements under Regulation D. More recently, Phoenix Energy has expanded its fixed-income offerings through SEC-registered offerings available to accredited and non-accredited investors nationwide, including its registered corporate bond offering and Phoenix Flex Junior Secured Notes.
It’s important to remember that every investment comes with some level of risk. Even if the interest rate of the fixed-income is attractive, the financial condition of the company behind it is important to take into consideration. That’s why investors should take the time to review the offering materials, review the issuer’s history of making scheduled interest and principal payments, where available, and review the issuer’s disclosed use of proceeds.
For those exploring alternatives to equity markets or low-yield savings accounts, fixed-income investments can be an option but only when paired with careful research and a clear understanding of the risks involved.
Investors interested in learning more about how Phoenix Energy bonds work, join a live webinar, watch a short on-demand video, or speak directly with someone from the Investor Relations team.
Disclaimer: Not an offer to sell, nor a solicitation of an offer to buy, any securities. Securities offered through Crescent Securities Group, Inc., member FINRA/SIPC, pursuant to a registration statement and prospectus or private placement memorandum, as applicable, and only where lawful. Investors must meet suitability requirements. For a complete discussion of risks, you should carefully review the registration statement and prospectus or private placement memorandum for the applicable offering prior to making any decision to invest. These documents may be obtained at phxoffering.com. An investment involves risk, including possible loss of principal and may be illiquid or unsecured. Past performance does not guarantee future results.
This material is provided for informational and educational purposes only and should not be considered investment, legal, tax, or financial advice.