Comparison between bonds and equities

Let us understand the difference between bonds and equities.

Look at the following images.

Which activity do you think involves more risk?

Understand the risk

The motorbike stunt is risky, right?

Equity investments are riskier than debt investments.

To learn more about equity investing, read our guide on Equities.

Debt investments and equities differ based on maturity period.

High investments in equity or share market investing can be better for the younger generation
It can be better to move towards debt investing as you grow older. This is because your capacity to take risks declines with age

Debt investments can be better if you are looking for stable returns
Equity investments can be better if you are looking for high to very high return-giving, risky investments

Based on your risk profile and your goals, you can choose to invest in either equity or debt.

It can be better to invest some proportion in both these assets for diversification.

Let us do a quick recap!

Bonds have a pre-specified maturity period. For this period, you earn interest
The rate of interest on bonds is called the coupon rate, and the amount earned as interest is called bond yield
Bonds can provide stable returns over a period
You should look for the credit rating of the companies and organisations before investing in debt

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That was easy! Wasn’t it? Congratulations on completing the guide on Debt Investing!

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