Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year and repay the principal amount on maturity. Fixed-income securities can be contrasted with equity securities - often referred to as stocks or shares - that create no obligation to pay dividends or any other form of income.

In order for a company to grow its business, it often must raise money - for example, to finance an acquisition, to buy equipment or land, or to invest in new product development. The terms on which investors will finance the company will depend on the company's risk profile. The company can give up equity by issuing stock or can promise to pay regular interest and repay the principal on the loan (bonds or bank loans). Fixed-income securities also trade differently than equities.