Difference between Shares and debuntures

The most common form of Shares in stock market are Equity shares. There are some less common shares like preference shares and rights share. Whenever a company wants more capital for expansion or new projects they will accumulate the money by selling shares to the public. Otherwise they can sell debuntures.

The important difference between shares and debuntures.

1. For debuntures the company should pay the interest. Interest is mandatory for debuntures. For shares dividend is decided by the company depending on the profit that makes. If there is no or less profit the company may not give dividend for that year.

2. For debuntures the interest rate is fixed and will not increase or decrease. Dividend for Equity shares will vary depending on the performance of the company.

3. The amount invested in the debuntures should be returned within specified number of years. The company has no obiligation to return the money invested in shares. You have to sell your shares in the secondary market only.

4. Debentures are more secure than share investment.

What is the difference between debuntures and Fixed Deposits.

You can invest in fixed deposits any time you want. You can buy debuntures only when it is offered by the company. Then if it is listed in stock market you can buy it in prevailing market rate. You can sell debuntures at any time in the secondary market. This facility is not available in Fixed Deposits.

Investment options available in India

Various investment options available in India

1. Deposits

• Post office Recurring deposit
• Fixed deposits in banks
• Fixed deposits in companies

2. Government offers

• National Savings Certificate - NSC
• Public Provident Fund - PPF
• Kisan Vikas Patra - KVP

3. Debt Instruments

• Public Sector Bonds
• Government Securities
• Treasury Bills
• State Government Bonds
• Debuntures from companies
• Bonds from Financial Institutes
• Commercial papers

4. Mutual Funds

• Growth Oriented Funds
• Returns at fixed interval
• Balanced Funds

5. Derivative Products

• Futures
• Options
• Forwards
• Warrants
• Swaps

6. Shares

• Equity Shares
• Preference Shares

Which one to select to make an investment? It depends on your needs whether you want your money to be safe and risk free, want higher returns, liquidity i.e able to encash your investment in short time.

Fixed Returns

These schemes fixes a certain percentage of yearly return on your investment. You will get that amount for sure. You will not get extra. Fixed Deposits in Banks, Post Office, Debuntures and Bonds give fixed returns and your investment is also safe.

Variable Returns

Mutual Funds and Shares comes under this category. You can not be absolutely sure about the returns. You may or may not get good dividend. You may or may not get bonus shares. The returns depends on the companies performance and market conditions.

Tax Exemptions

Income from Government Post office deposits, NSC, KVP will get Tax benefits. Some mutual Fund Incomes are also exempted from Tax. Dividends from shares are also exempted from Tax!

Time Limited

Fixed Deposits in KVP, NSC is are Time limited. After the fixed Time period the deposit will mature and you will claim your money. Except KVP and NSC you can buy other schemes in the market at the prevailing rate.

You can get loan against NSC and KVP bonds.

Mutual Funds, Shares and Derivatives have no time limit. You can buy them any time and sell any time.

Keep an eye

Fixed deposits in Banks and POST office does not require your attention. The returns will be the same whether you watch it or not. But you have to be careful about investment in Mutual Funds and share. You have to buy them at right time and sell at right time. Profit or Loss depends on the timing of purchase and sales.

An Introduction

Introduction to Shares & Stocks

What is share / stock market? What is BSE / NSE Index? How it is calculated? How to buy a share? What is Initial Public Offer (IPO)? What is primary market? What is secondary market? Who is trading member? What is inside trading? The questions are endless. You will learn everything about shares and stock market in this website. Many people are afraid about share trading because they don't know these technicalities. These jargons are really scary to them.

Basically a share is a ownership in a public limited company. A private limited company's shares are owned by its proprietors and partners. In India a company should be registered with registrar of Companies in order to be called a company and get the benefits of a company. In the long run a company may need funds for expansion and new projects. So a company may want to collect the fund from the public or people willing to invest. So a company may go public. The company will become public limited as it is owned by public. An Initial Public Offer or IPO is the first issue of shares to public. A company must be listed on Stock Exchange in-order to trade its shares. BSE (Bombay Stock Exchange) is India's popular stock exchange. NSE is other popular Stock Exchange.

Once the shares are listed they are traded in secondary market. A company will sell shares at a face value (Normally Rs.10). A popular and big company may sell it share with a premium i.e Face value + extra premium. People will still want to buy its shares because it a valuable company.

When you buy a company's share you buy part of the ownership of the company. Why should you buy a share? You want to make an investment and you want returns from your investment. By investing in Shares you will get yearly dividend and also your share value may increase. It may also decrease and you will lose your money.

How to avoid losses in share market? How to become a successful trader? Please read on.