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Updated 2mo ago.
Updated 2mo ago.
Fixed income refers to investments that pay regular, predictable interest payments, primarily bonds. These investments offer less growth than stocks but more stability.
ZAG.TO (BMO Aggregate Bond Index ETF) holds thousands of Canadian bonds — government and corporate. It pays monthly distributions and fluctuates much less than stocks. In a portfolio like VBAL.TO, the 40% fixed income portion acts as a cushion when stock markets drop.
Fixed income reduces your portfolio's volatility. In 2022, when stocks fell 15%, having 30-40% of your portfolio in bonds limited your total loss. The closer you get to retirement or a short-term financial goal, the more your fixed income allocation should increase.