Bonds vs Shares- Which one should you invest in ?

Bonds vs Shares- Which one should you invest in ?

Investment in the share market has seen a sudden boom in the last few years, especially during the pandemic. Are you also an investment enthusiast? If so, it would interest you to know that you have a world of options to invest in, that stretch far beyond the traditional shares and fixed deposits. One of these investment avenues is bonds.

Several publicly-traded companies give their investors two ways to invest with them in the form of shares as well as bonds.

You would be surprised to know that on the global level, the bond market is double the size of the share market! Generally, investors are unaware of the

investment opportunity that lies in bonds and people are often left wondering how to buy bonds and what are bonds in India. If you want to find out more about the top bonds to invest in India, click here.

Let us find out more about bonds and shares and see how they are different from each other.

Basics of Shares Shares, also known as equity, are a part-ownership in a company through which the shares issuing company sells a part of the ownership of their company to the buyers.

Shares are generally bought and sold on the various exchanges of the stock market, like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Read also- Which are the best bonds to invest in India, Is now a good time to buy bonds online Some companies may pay out a part of their profit earnings to their shareholders in the form of a dividend. However, companies are not obliged to pay a dividend to their shareholders, and this dividend may increase or decrease over time.

Shares can be understood as a perpetual investment; they continue to evolve, and their price keeps fluctuating in the market. Their lifecycle ends only when the company goes bankrupt or is taken over by another company.

Basics of Bonds Bonds are a kind of loan investment whereby the bond issuing entity takes a loan from the bondholder for a fixed time. In exchange for the loan, the bond issuer promises to pay the principal amount and a certain rate of interest to the bondholder as per the pre-decided payback schedule.

Check also- bond investment india, how to buy bonds in india, Government Bonds, Zero Coupon Bond, where to buy corporate bonds Bonds are a temporary investment and have a fixed lifecycle, unlike shares, including the stages from issuing to maturity.

Difference between Bonds and Shares Bonds are less riskier and less volatile compared to shares.

Bonds offer a regular income and a fixed interest payout, unlike shares.

The tenure of a bond is fixed, at the end of which, the bonds cease to exist, unlike shares.

Bonds are placed above shares on the capital hierarchy. It means if the company defaults, bondholders get a preference over shareholders.

While investing in shares, the investor needs to study the share across various parameters and judge its market performance over time. On the other hand, while investing in bonds, the investor only needs to focus only on the core financials of the company.

Investment bonds offer good diversification to investors who do not want to put all their eggs in the same basket and want to diversify their investment portfolio, adding them to their equity investments.