How to Invest in Fixed Rate Capital Securities

Fixed rate capital securities offer the benefits of both stocks and bonds to the investor. These securities generally are low-cost, pay regular dividends to the investor and have no definite maturity date. Fixed rate capital securities are paid for by company profits and so they are unaffected by interest rates and are tax-deductible for the investor. It's fairly easy to invest in fixed rate capital securities.

Things You'll Need

• Stockbroker
• Investor prospectus

Instructions

1. Talk to your stockbroker about the available fixed rate capital securities. These securities are sold in an initial public offering to financial companies and traded on the secondary market between brokers. You can research different securities online, but your broker will be able to provide you with a list of what is actually available.

2. Check a financial website to get the investment ranking of your potential fixed rate capital securities. Standard and Poor's ranks these securities just like bonds, with AAA being the best investment, BB being average and C being a poor investment. The ranking is an indication of the financial strength of the issuer and the probability that it will be able to repay your principal.

3. Give your stockbroker a specific number of fixed rate practical securities to buy. Your broker will take a set commission with every transaction, so try to limit your purchases and sales to keep your profits up. Remember to find out if the fixed rate capital securities have set lifetimes or if they are indefinite.

4. Evaluate your total loss of holding onto these securities if the company has to suspend payment. Unlike bonds, you do not always forfeit your principal when a company is forced to default. Fixed rate capital securities give you the chance to wait out the company's financial problems and your dividends will usually resume when profits pick up.

5. Balance your portfolio to include the new securities. Many investors buy fixed rate capital securities with the intention of holding them over the long-term. If you see your securities as low-risk investments, be sure to invest in some high-yield bonds or stocks to keep your total portfolio value high.

Tips & Warnings

• Some fixed rate capital securities give you voting rights, just like some stocks. There are often both voting and non-voting securities offered by the same company. Be sure to check the prospectus to find out about your rights as a holder.

• Most fixed rate capital securities pay out dividends that are independent from the company's stock value.