Shares vs Debentures?

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Feb 20, 2023

Shares and debentures are two different types of securities that represent different forms of investment in a company.

Shares, also known as stocks or equities, represent ownership in a corporation. When you purchase shares of a company, you become a part-owner of that company and are entitled to a portion of the company’s profits and assets. The value of your shares can rise or fall depending on the performance of the company and the overall stock market.

Debentures, on the other hand, are a type of debt instrument issued by a company. They represent a loan made by investors to the company, and in return, the company agrees to pay the debenture holders a fixed rate of interest over a specified period of time. Unlike shares, debentures do not confer ownership in the company, but instead represent a claim on the company’s assets in the event of default.

In summary, shares represent ownership in a company and offer the potential for capital appreciation, while debentures represent a loan to the company and offer a fixed rate of return. Both shares and debentures can play an important role in a well-diversified investment portfolio.