In plain words: Investments where the future return cannot be guaranteed or anticipated, such as stocks, being subject to market fluctuations.
Variable income covers investments whose returns are not fixed in advance and depend on how markets perform. A typical example is a stock, part of the broad global equities class, where the future outcome can rise or fall with company results and broader conditions.
How is variable income different from fixed income?
With fixed income, the payment schedule is known up front. With variable income, the return is uncertain and can be higher or lower than expected. That uncertainty is the price paid for the potential of stronger long-term growth.
What should investors expect from variable income?
Greater volatility — values can move sharply over short periods. Historically, broad baskets of these assets have rewarded patience over long horizons, though past patterns never guarantee future results. Spreading exposure helps manage the inevitable swings.
Key takeaways
- Variable income has returns that are not fixed and depend on market performance.
- It carries more short-term volatility than fixed income, in exchange for higher growth potential.
- Long horizons and diversification help an investor sit through its ups and downs.