Scouting for means of wealth creation and do not wish to bear heavy investment risk? Invest in Debt instruments. They are a simple instrument that offers to earn you reasonable returns. The instrument is not linked to market standing, hence a safer bet.  Bonds are the most common Debt Instruments to invest in. Bond is a Loan you offer to the issuer at a fixed interest rate for a fixed time.

On maturity, the issuer provides the principal amount and interest earnings, allowing you to earn good profits. From Government Bonds to Debentures following are the top Debt Instruments to consider:

Government Bonds

Government Bonds are investment instruments issued by the Government. Bonds are typically issued to meet immediate demand for funds for infrastructure development by the Government. In India, both the Central and State Government issues such Bonds. Those issued by the State Government are also known as State Development Loans. Both types of Bonds offer to reap fair returns.

The Government Bond interest rate is called the coupon rate. The coupon rate can be fixed or floating. Most investors are drawn to invest in Bonds, given the sovereign backing. The security of the investment allows you to be tension free and be patient to earn good returns.

Corporate Bonds

Another popular and profitable Debt instrument to invest in is Corporate Bonds. These Bonds work like Government Bonds. The key difference is the issuer. A business organisation issues Corporate Bonds. Businesses commonly issue these bonds to raise working capital, fund expansion projects, or invest in advertising. Corporate Bonds are a great investment option for their potential to earn higher returns.

Generally, Corporate Bonds have a higher interest rate offering than Government Bonds and other Debt instruments. You also enjoy maximum liquidity with these Bonds. This allows you to meet all your financial requirements hassle-free. Since there is no sovereign backing here, you must be mindful of security of the Bond you invest in. Consider the issuer’s credit rating to make a suitable choice.

Higher the issuer’s credit rating, the more assured you can be about your investment’s security. However, note Bonds with higher credit rating usually draw a lower interest rate and vice-versa.

Non-Convertible Debentures

Debentures are investment instruments issued by companies to raise capital. They are issued at a fixed interest rate and maturity period. Debentures are of two types: Convertible and Non-Convertible. With Convertible Debentures, you can convert to a share of the company at maturity. With NCD, you have no such conversion option. Non-Convertible Debentures make an incredible investment choice. The instrument is listed and tradable on the stock market.

There are two types of NCDs: Secured and Unsecured. Secured Debentures are backed by the company’s assets. Unsecured Debentures are based on the company’s credit rating. Always invest in Debentures with the highest credit rating!