Invest in Bonds/ Non Convertible Debentures

Debentures are long-term debt instruments issued by companies or governments to raise funds. When you buy a debenture, you’re lending money to the issuer — in return, they promise to pay you regular interest and repay the principal at maturity.

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Key Reasons to Invest in Debentures

1. Regular Fixed Income

• Debentures pay fixed interest (coupon) at regular intervals (quarterly, half-yearly, or annually)

2. Lower Risk Compared to Shares

• While shares fluctuate in value based on market performance, debentures are less volatile because returns are fixed and predictable.

• In case of liquidation, debenture holders are paid before shareholders.

3. Diversification​ in portfolio

4. Secured Investment (in some cases)

• Secured debentures are backed by the company’s assets, which adds a layer of safety if the company defaults.

5. Tax Efficiency (in some instruments)

• Certain debentures, like tax-free bonds, allow you to earn interest that’s exempt from income tax.

6. Tradable on Exchanges

• Some debentures are listed, allowing you to sell them before maturity if you need liquidity or want to take advantage of interest rate changes.

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⚠️ Risks to Consider

Before investing, be aware of the potential downsides:

• Credit risk – The issuer might default on payments.

• Interest rate risk – If market rates rise, debenture prices fall.

• Liquidity risk – Not all debentures are easy to sell.

• Inflation risk – Fixed returns may lose value over time due to inflation.