Is share a debt instrument?

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Feb 20, 2023

Shares, also known as stocks or equities, are not debt instruments. They represent ownership in a company and give the holder a claim on a portion of the company’s profits and assets. When you own shares, you are an owner of the company and do not have a legal obligation to repay a fixed amount of money as with a debt instrument.

Debt instruments, such as bonds, represent a loan made to a company or government, and the holder of the bond is entitled to receive regular interest payments and the return of the principal amount at maturity. Bonds are considered debt because the issuer of the bond is obligated to repay the borrowed amount plus interest to the bondholder.

Shares and bonds are different types of securities and have different characteristics and risks. It’s important to understand the differences before making an investment decision and to consider your individual financial situation and investment goals.