BASIC THINGS TO KNOW ABOUT DEBT

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To know about basic things before investing in a debt market, investors should know about bonds and the bond market. Visit www.akgroup.co.in to know more.

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BASIC THINGS TO KNOW ABOUT DEBT:

BASIC THINGS TO KNOW ABOUT DEBT

What is Debt Market?:

What is Debt Market? Debt market is a market meant for buying or selling of debt securities also called as bonds or fixed income securities.

BONDS:

BONDS A bond is simply a loan with a definitive instrument features taken (issued) by an entity from the lender. Here, the entities taking a loan could be governments (central, state or municipal bodies) or companies (PSUs, private corporates , financial institutions etc) and are called as Issuers. The lender could be individuals, corporates , mutual funds, banks or anybody who invests in order to receive periodic income and are called as Investors.

DIFFERENCE BETWEEN EQUITY AND BONDS:

DIFFERENCE BETWEEN EQUITY AND BONDS When an investor invests money via equity, he becomes an owner in the corporation issuing the equity shares. With ownership he also gets voting right in the company and a share in future profits.

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In case of debt, the investor becomes a lender to the issuing corporation. As a lender, he has higher claim to the assets of the issuer as compared to a shareholder in the event of the company filing for bankruptcy. However, a debt investor does not get voting rights or a share in future profits. He is only repaid in the form of a predetermined interest rate.

REASONS FOR INVESTING IN BONDS:

REASONS FOR INVESTING IN BONDS Bonds offer a predictable stream of payments by way of interest and repayment of principal at the maturity of the instrument. Debt securities enable wide-based and efficient portfolio diversification and thus assist in portfolio risk-mitigation. The investors benefit by investing in fixed income securities as they preserve and increase their invested capital and also ensure the receipt of regular interest income. Most bonds carry a fixed charge on the assets of the entity and generally enjoy a reasonable degree of safety by way of the security of the fixed and/or movable assets of the company. The investors can even neutralize the default risk on their investments by investing in Govt. securities, which are normally referred to as risk-free investments due to the sovereign guarantee on these instruments.

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Visit http://www.akgroup.co.in to know more

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