Shares Vs Debentures

Podcast Duration: 07:29
Angel One podcast ke iss episode me aapka swagat hai.

For anyone who is interested in investing, sabse pehla sawaal ye hota hai ke vo apna paisa kahan invest karna chahte hain. Kisi bhi investor ka goal simple hota hai: jo paisa invest kiya jaaye uske zyada se zyada return mile. And when it comes to choosing where you want to put your money, sabhi options dhyaan se assess karna bahut important hai. Two major securities that you need to choose from are shares and debentures. Tohaa j iss podcast me jaante hain ke shares aur debentures kya hota hain aur un dono me kya difference hota hai.

Shuru karte hain shares se. We often hear about how we should invest in shares - lekin shares me invest karne ka matlab kya hota hai? Well, a share is basically a unit of equity ownership in a company. Kisi bhi company ki puri financial value uska capital hota hai, and that capital is made up of shares. Jaise biology me humne padha hai ke cell is the smallest, basic unit of life, vaise hi shares are the basic unit of a company. The shares are owned by investors who are known as shareholders.

Company ki ownership sabhi shareholders ke beech banti hoti hai - aur kiske paas company ka kitna hissa hota hai depends on the how many shares they hold. Inn shares ke badle me shareholders ko dividends milte hai. These dividends depend on the profits that the company makes, so if the company is profitable, aapko dividends ke form me regular returns milenge. Mostly, companies announce a dividend in the years when they are profitable and don’t give dividend payouts if they are planning to re-invest the money into the company.

On the other hand, we have debentures. Debentures bhi long-term investments hi hote hain, but they are debt instruments jinse companies apne liye capital ya funds raise karti hain. Agar ek company funds raise karna chahti hai aur woh loan borrow karna consider karti hai, then it is a long process, they will have to give collateral security, pay a high rate of interest.

Debentures are a great way of raising funds through borrowing, because they act as medium to long-term unsecured loan contracts between the debentureholders and the company. All the company has to do is pay returns at a fixed rate of interest.

Ye interest rate depend karta hai company ki reputation pe, but whatever rate is decided - woh fixed bhi rehta hai aur guaranteed bhi.

Agar aap Stock market me invest karna consider kar rahe hain, then both shares and debentures are lucrative investment opportunities, but they come with different features and serve different investment needs. Let us look at these differences to figure out which one of these would suit your investment needs:

The first parameter is the purpose that both of these investments serve. Jab ek company shares issue karti hai, uska maqsad hota hai business me long-term investment. Doosri ore, company agar debentures issue karti hai, then it is usually to meet a medium-term financial requirement.

The second parameter is the ownership component. In fact, this is the single most important difference between shares and debentures. Agar aap kisi companies ke shares khareedte hain, it means that you have gained ownership over that part of the company’s capital. On the other hand, debentures give you no such ownership over the company.

Because of the nature of these two investments, the relation between the investor and the company also differs under these two arrangements. Agar aap company me shares khareedte hain, you are called the shareholders of the company. You get voting rights in the company’s annual meetings and board meetings. You basically get to have a say in the management of the company like owners do.

On the other hand, the debenture holders are seen as the creditors of the company. In a way, company ko debenture holders ne loan diya hai, jiske badle company unhe fixed interest pay karti hai. But they don’t get ownership so they have no voting rights or management say.

Time is another factor where shares and debentures differ. Here’s the deal: ek baar aapne kisi company ke shares me invest kiya, you get ownership over the company. You can now keep this ownership with you for as long as you like. Usually, jab tak aapko company me growth potential dikhega, you will stay invested. But with debentures, you are acting as a creditor and lending the company your money so this contract is only temporary until the company repays you for the borrowed amount. Debentures have a maturity date in-built - tab tak aapko creditor ke taur pe interest milta hai.

Which also brings us to the next important difference, and that is the return on investment. Humne podcast ke shuruaat me hi kaha tha - anytime you make an investment the goal is to maximise the returns. Debentures ke under investors get a fixed guaranteed income - and this interest comes in irrespective of whether the company earns profit in a year or not.

Kyuki debentureholders creditors hote hain, they are paid the interest due even in the case of loss. Shareholders ke case me aisa nahi hota. For them, dividends come in only when the company generates enough profit. So the return on your investment is not always guaranteed with shares.

Ab hum return ki baat kar hi rahe hain, toh it is impossible ke hum risk ki baat na kare. Risk is another parameter where shares and debentures offer vastly different things. Kyuki debentures secured loans hote hain aur un par regular interest payments ki jati hai, the risk is zero. On the other hand, shares have no such assured regular return. In fact, the risk factor is high because there is no security or collateral to fall back on.

Agar aap ek situation consider karenge, where a company is going into liquidation, the creditors are paid first and the shareholders are paid in the end, if any funds are left. So, shareholders assume the most risk.

Ultimately, debentures aur shares dono ke apne separate advantages aur features hote hain. Aapki individual investor preferences se hi determine hoga ke aap assured returns ke liye debentures me medium-term investment karenge ya phir ownership benefits ke saath shares me higher-risk, high-reward, long-term investment karenge! Whatever you choose, keep in mind the features and risks that come with the investment!