Bonds vs debentures investopedia forex

A debenture is an unsecured loan you offer to a company. The company bonds vs debentures investopedia forex 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. When you buy stocks, you become one of the owners of the company.

Your fortunes rise and fall with that of the company. If the stocks of the company soar in value, your investment pays off high dividends, but if the stocks decrease in value, the investments are low paying. The higher the risk you take, the higher the rewards you get. Debentures are more secure than stocks, in the sense that you are guaranteed payments with high interest rates.

The company pays you interest on the money you lend it until the maturity period, after which, whatever you invested in the company is paid back to you. Debentures and bonds are similar, but bonds are more secure than debentures. In the case of both, the company pays you a guaranteed interest that does not change in value irrespective of the fortunes of the company. However, bonds are more secure than debentures, and carry a lower interest rate. In the case of bonds, the company provides collateral for the loan. Moreover, in case of liquidation, bondholders will be paid off before debenture holders.