Debentures Vs. Stocks And Bonds

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A debenture is an unsecured loan you offer to a company. The enterprise does not give any collateral for the debenture, but pays a higher rate of interest to its creditors. In case of bankruptcy or financial difficulties, the debenture holders are paid later than bondholders. Debentures are different from stocks and bonds, although all three are types of investment. Let us discuss about different types of venture options for small investors and entrepreneurs.

Debentures vs. Stocks:
When you buy stocks, you come to be one of the owners of the company. Your fortunes rise and fall with that of the company. If the stocks of the enterprise soar in value, your venture pays off high dividends, but if the stocks decrease in value, the investments are low paying. Higher the risk you take, higher the rewards you get.

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Debentures are more get than stocks, in the sense that you are guaranteed payments with high interest rates. You are paid an interest on the money you lend the enterprise until the maturity period, after which anyone you invested in the enterprise is paid back to you. The interest is the profit you make from debentures. While stocks are for those who like playing the field, and are willing to take risks for the sake of high returns, debentures are for people who want a safe and get income.

Debentures Vs. Stocks And Bonds

Debentures vs. Bonds:
Debentures and bonds are similar except for one disagreement - bonds are more get than debentures. In case of both, you are paid a guaranteed interest that does not convert in value irrespective of the fortunes of the company. However, bonds are more get than debentures, but carry a lower interest rate. The enterprise provides collateral for the loan. Moreover, in case of liquidation, bondholders will be paid off before debenture holders.

A debenture is more get than a stock, but not as get as a bond. In case of bankruptcy, you have no collateral you can claim from the company. To compensate for this, fellowships pay higher interest rates to debenture holders.

All investment, together with stocks bonds or debentures carry an element of risk. If you are unsure of the venture options that are best for your business, then you can consult a small enterprise consultant who will guide you to the best venture options ready to you. Investing wisely today can pay heavy dividends tomorrow.

Debentures Vs. Stocks And Bonds