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Although savings are important, the percentage of profit offered from these accounts, tend to be relatively low. Considering the fact that the cost of living is constantly on the rise, there is a need to invest, in order to make sure that you have enough money to fund your long-term goals. There are a number of investing options available. For example, you can choose to buy a house and receive some income through the rent. Or you can purchase and asset which will help you generate revenue over time. In both these cases the amount of money that has to be put down in the initial investment is extremely huge. With this in mind, a good option is to invest in the capital market. Here there are more than a few options available and it can be very confusing for a first time investor. However, in order to become a success, there is a need to do a good amount of research on the market. Risky investments will help you reach your financial goal quickly. However, there is no certainty that the risk will pay off. On the other hand there are safer shares that remain relatively stable in spite of market fluctuations. Hence, it is important to find a balance between both options. But where should you invest your money? Should you opt for equity shares or bonds, Funds or debentures? In order to realize which option will help you reach your financial goals, you must get a basic understanding of the options available. Let us start with the difference between bonds and debentures: A debenture is issued by a company or an organization in order to raise medium and short-term funds. This is especially used for expansion and diversification of a business. They are similar to equities and can be transferred from one person to the next. However, the owners of debentures are not given voting rights at company meetings. Hence, the investors basically just provide a loan to the company. There are two types of debentures available, the first is convertible debentures. These can be converted into equity shares in the future. The other option is non-convertible debentures this cannot be changed into an equity share but the percentage of returns received remains high. Now let us understand what bonds are and how they work to benefit the company and the investors. They are actually contract notes issued by the company. The organization will pay interest to the holders of the bonds and the principal amount will be returned, when the bond matures. Bond holders are not entitled to vote at company meetings and the returns from this investment are relatively secure. The obvious differences that can be spotted are in the fact that a bonds are less risky that debentures. Since, a debenture is an insecure loan that is made to the organization, the percentage of returns offered is high sine you are not offered any form of collateral if the company is declared bankrupt. Bond holders do not get periodic installments but rather the principle amount plus interest, on maturity of the bond. Thus, you will be able to distinguish between the pros and cons of each of these investment options. You can study the market and decide which one is best to help you achieve your financial goals.
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