| A debenture is an unsecured loan you offer to a | | | | willing to take risks for the sake of high returns, |
| company. The company does not give any | | | | debentures are for people who want a safe and |
| collateral for the debenture, but pays a higher | | | | secure income. |
| rate of interest to its creditors. In case of | | | | Debentures vs. Bonds: |
| bankruptcy or financial difficulties, the debenture | | | | Debentures and bonds are similar except for one |
| holders are paid later than bondholders. | | | | difference - bonds are more secure than |
| Debentures are different from stocks and bonds, | | | | debentures. In case of both, you are paid a |
| although all three are types of investment. Let us | | | | guaranteed interest that does not change in value |
| discuss about different types of investment | | | | irrespective of the fortunes of the company. |
| options for small investors and entrepreneurs. | | | | However, bonds are more secure than |
| Debentures vs. Stocks: | | | | debentures, but carry a lower interest rate. The |
| When you buy stocks, you become one of the | | | | company provides collateral for the loan. |
| owners of the company. Your fortunes rise and | | | | Moreover, in case of liquidation, bondholders will be |
| fall with that of the company. If the stocks of | | | | paid off before debenture holders. |
| the company soar in value, your investment pays | | | | A debenture is more secure than a stock, but not |
| off high dividends, but if the stocks decrease in | | | | as secure as a bond. In case of bankruptcy, you |
| value, the investments are low paying. Higher the | | | | have no collateral you can claim from the |
| risk you take, higher the rewards you get. | | | | company. To compensate for this, companies pay |
| Debentures are more secure than stocks, in the | | | | higher interest rates to debenture holders. |
| sense that you are guaranteed payments with | | | | All investment, including stocks bonds or |
| high interest rates. You are paid an interest on the | | | | debentures carry an element of risk. If you are |
| money you lend the company until the maturity | | | | unsure of the investment options that are best |
| period, after which whatever you invested in the | | | | for your business, then you can consult a small |
| company is paid back to you. The interest is the | | | | business consultant who will guide you to the best |
| profit you make from debentures. While stocks | | | | investment options available to you. Investing |
| are for those who like playing the field, and are | | | | wisely today can pay heavy dividends tomorrow. |