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Fixed and Variable Investment is an investment with a fixed or stated return, like a coupon on a bond or dividend on a stock, plus a variable component in the form of capital gain or loss. The variable component subjects the investment to principal losses, as well as gains.
Synonyms: growth and income investment
For context, it's important to realize that the fixed rate of return on some investments has the potential to be reduced or eliminated. This is especially true in the case of stock dividends. While a Company's Board of Directors is reluctant to reduce dividend payouts, it does occur during times of financial stress. During the Great Recession in 2008-2009 many banks reduced or eliminated their dividends to conserve cash.
Joy: Doc, is a high-yield bond a fixed and variable
investment?
Doc: Certainly! They're bonds with high levels
of both.
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Treasury Bill
True. Most companies hold liquid balances in cash and equivalents.
Still unclear on Fixed and Variable Investments? Try out our financial modeling Series called Quant 101.
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