In the context of investing, debt refers to a category of financial instruments where an investor lends money to an issuer, a government, company, or institution in exchange for regular interest payments and repayment of the principal at the end of the agreed period.
Debt instruments are the opposite of equity. When you invest in equity, you become a part-owner of a company. When you invest in debt, you become a lender you have no ownership stake, but you have a contractual right to receive your money back with interest.
Common debt instruments include bonds issued by companies or governments, G-Secs issued by the central or state government, Treasury Bills for short-term government borrowing, Non-Convertible Debentures (NCDs) listed on exchanges, and fixed deposits offered by banks.
| Debt | Equity | |
| Role of investor | Lender | Owner |
| Returns | Fixed | Variable |
| Risk | Lower | Higher |
| Priority in wind-up | Paid first | Paid last |
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