The Difference Between Equity Research and Fixed Income Research 

The BFSI industry includes banking, financial services, and insurance firms. Also, BFSI firms use equity research and fixed-income analytics to facilitate reliable risk evaluation and wealth expansion strategies. Therefore, investors and fund managers secure excellent returns, and equities help corporations raise funds. This post will explore the difference between equity research and fixed-income securities. 

Fixed Income vs Equity Research

1| What Is Equity Research?

Equity research (ER) studies the stocks made available by exchange-listed companies, i.e., publicly-traded enterprises. One of the objectives of equity research firms is to calculate the fair price corresponding to a screened stock to protect investor interests. 

Equity researchers must analyze the financial statements and balance sheets while maintaining transparent communication with their clients. Additionally, ER involves the creation of investment evaluation documentation that guides investors in understanding the risk-reward aspects of stocks. 

Also Read: Why Market Research Is a Must for the Healthcare Industry

Characteristics of Equity Research Report

The equity research firms document what led them to make the buy-sell-hold recommendations. For example, an “investment thesis” means that the ER analysts believe that a stock will appreciate in value because of the specified performance prediction metrics. 

Assume you are an investor or a fund manager and want to know which factors are essential in balancing the risks in equities with the rewards. ER reports can educate you and your clients with qualitative investment research insights. So, you can trust the buy-sell calls as the equity research firms suggest. 

2| What Is Fixed Income? 

Fixed income products are financial instruments that provide investors with a consistent return on investment (ROI) in the form of interest or dividends. So, many financial research services assist investors in integrating fixed-income securities into their portfolios besides equity. 

Equities can reward investors in non-monetary ways, and other investment vehicles give variable returns. However, you already know what the payments will be when you invest in fixed-income securities instead of equity. 

Characteristics of Fixed Income Research

You can find ETFs, or electronically traded funds, that have the properties of a fixed income solution. Therefore, you require financial research services that can recommend a strategic procedure to benefit from these securities. 

The assured returns and interest in the fixed income products are appropriate for investors and fund managers who seek stable ROI through conservative (low risk) investment strategies. 

Comparing the Features of Fixed Income vs. Equities

• Equities give investors partial ownership of the company, but fixed income instruments do not provide this advantage. You can claim the financial returns, but you do not get ownership of the fixed income issuing organization. 
• Corporations release equity stocks, whereas government bodies and private institutions can offer fixed-income vehicles. 
• Equities are riskier than fixed-income products offered by BFSI entities. 
• Fixed income investments provide stable returns, while equity stocks grow wealth fast. 
• Investors who purchase equities are owners, but bondholding investors are creditors. 

Types of Fixed Income vs. Equity Research

1| Categorization of Fixed Income Instruments

The financial products in the fixed income investment research include government or corporate bonds. Besides, you may want to understand the following types of fixed income in financial research services. 

• Treasury bonds, or T-bonds, mature in 30 years, while some might mature earlier, i.e., in 20 years. 
• Also, Treasury notes (T-Notes) mature ten years after paying semiannual interests. 
• Treasury bills mature in one year, and investors get the difference between their face value and reduced purchase value. 
• TIPS mean treasury inflation-protected securities that adjust the principal amount in proportion to inflation-deflation calculus. 
• Municipal bonds come from the states and local regulatory bodies instead of the apex government. 
• Corporate bonds depend on the company’s creditworthiness. Therefore, you will notice that there are many distinct capital requirements in such fixed-income instruments. 
• Junk bonds promise higher returns due to much greater risk exposure. 
• A certificate of deposit matures in five years; BFSI institutions offer them. i.e., banks. However, you get higher interest compared to a standard savings account. 

2| Types of Equity Investments

Equity research firms support investors in diversifying their portfolios through a robust evaluation of stock prices and corporate growth forecasts. You can consider the following variations of equity instruments in the comparison of fixed income vs. equities. 

• Stockholder’s or shareholder’s equity in corporations, 
• Owner’s equity via sole proprietors and business partners. 

Also, see the stock categories and equity accounts mentioned below. 

• Common stock for initial investments in new businesses, 
• Preferred stocks with no voting rights, 
• Additional paid-in capital (contributed surplus), 
• Treasury stocks with negative balance accounts, 
• Retained earnings accounts at the firm. 

Finally, you can group the equity products into small-caps, mid-caps, and large-caps. Besides, financial research services also recognize equity options, futures, and arbitrage schemes. 

Conclusion 

Hopefully, you have explored and understood the difference between equity stocks and fixed income in financial research services. Investors can diversify their portfolios using equities and fixed-income securities. However, they must know how both differ in their risk-rewards dynamics.

Comparing fixed income vs. equities involves their conceptual distinction and the mechanisms of related wealth expansion. Therefore, how you allocate your capital to these instruments is complicated.

Equities are riskier than fixed-income bonds, but they have a greater ROI. Additionally, fixed-income vehicles have a longer lock-in period. So, you require an impartial assessment of stocks and a fair price evaluation before investing in either of these wealth enhancement offerings.

A leader in financial research services, SG Analytics, enables organizations to develop scalable risk management strategies and data-driven investment recommendations. Contact us today if you require the latest analytical technologies for excellent portfolio growth.