Debentures

It is simply a loan taken by a company that does not provide ownership of the company. You have to know about the fact that debentures and bonds have plenty of similarities, such as both are having fixed tenure and offering a fixed interest rate. Governments or companies make use of this for borrowing money.

Debentures are of two types, one is convertible, and the other one is non-convertible. The former is the one that can be converted to equity shares. But it yields low-interest rates. The latter is the one that does not be converted to equity shares, thus generating a higher interest rate.

Invest in NCD

It is a more excellent opportunity for people to invest for a specific period of time, and thus one can earn fixed interest. NCD is the debt investment in which people can lend money to the government or corporate entity that borrows funds. It is suitable for the following

• Low-risk appetite
• Constant return by means of leas risk
• Reliable periodic return when compared to the lump-sum return
• Diversification with a debt instrument

Highlights of NCD

Issue: NCD is offered by firms via an open issue. As an investor, you can purchase the same in the market if the issue is open. You can also choose to buy NCD being traded over the stock market in the later period.

Credit rating: Firms those who are having better credit ratings are allowed to issue NCD. Furthermore, each of the issuing is rated by the credit agencies too. These kinds of ratings will be changing based on the performance of the company.

Interest rate: When you have the highest credit rating, it will lower the interest rate. Most of the NCD also earn depending on the growth of their asset

Return on investment: In general, it offers a greater return on investment while comparing to the risk-free return, which is earned on fixed deposits as well as government bonds.

Why should you invest in NCD?

• It will reduce the risk since it is backed by the assets of the company.
• Higher ROI when compared to other investment avenues.
• You will be gaining the tax exemptions.
• They are listed and traded over an exchange, and this offers liquidity to an investor.
• It is really easier to track and handle because you can proceed it with online.

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