What are bonds? Difference from shares

Investment financial instruments, with(mutual investment funds), IIS (individual investment accounts), PAMM-accounts, in which investors trust funds to traders trading on Forex, shares, futures contracts on stock exchanges, etc., which can be used to obtain income from capital. In this article we will tell you in more detail about what bonds are. What is their difference from other securities and how can you invest in them?

What are bonds

Bonds and bonds are one and the same. The first name is more modern, as it came to us from the West very recently. Often found the meaning of "eurobonds", that is, securities that are quoted on the international exchange. The term "bonds" is used, as a rule, to domestic sales, but this is not a postulate. For example, US government securities are called US government bonds. Hence, these are equivalent concepts.

Bonds (bonds) - this is a security thatis a confirmation of the issuer's debt obligations to the investor. Buying them through exchange brokers, people actually lend to the company, acting as financial organizations and banks. Of course, for this issuers provide various bonuses, depending on the stated conditions. To better understand what bonds are, let's move on to the methods of payment for them.

Types of bonds in settlement with investors

Depending on how the investor will receive income, the bonds are divided into three main types:

• Bonds with a discount assume that allthe main bonus will be received by the purchasers upon presentation for payment. The nominal value of securities is higher than the real value. To understand this better, imagine that one person bought 100 rubles for 115, but they will give them to him only after a specified time. The exchange monitors the integrity of the entire operation.
• Bonds with a coupon involve interestfixed payments for a certain period of time to investors, which are called coupons. The nominal value of securities, as a rule, is the same as for the sale. All the main income is coupons. Suppose that one person bought 100 rubles for the same amount, but they will give it to him only after a year. The income is in monthly payments of 5 rubles.

• Bonds with a mini-coupon suggest a mixed system of the above-mentioned methods of profitability: a small percentage and a small difference in denomination.

Some wrongly think about bonds, that these are stocks. In fact, this is not so.

Difference from shares

Shares are securities that give them the rightowners to profit from the enterprise. Such income is called dividends. The more successful the firm, the higher the amount. In addition, the purchase of a share implies that the investor becomes a co-owner of the enterprise.

Bonds (bonds) are securities that areAssume a fixed guaranteed income. It does not matter how much the company has earned or lost during their time with the investor. In any case, the company must pay upon presentation of bonds.

It is not right to think about bonds, that this is the right to a certain share in the enterprise. Even if the investor buys securities much more than the entire charter capital of the firm, he will not become a co-owner.

Benefits

We hope, now it is clear what bonds (bonds) are. Now let's look at their main advantages:

• Assume a guaranteed income for investors. In fact, these are debt obligations undertaken by the issuing company, so the securities are not affected by its current financial position.
• The yield is higher than the usual bank deposit. Of course, in percentage terms it is small - around 10-12%, depending on the company. The bonds of the largest corporations and federal loan bonds yield even less, but the level of their trust is such that it is possible to draw an equal sign between them and bank deposits.

• Bonds can be sold on the stock market without losing the invested funds and incomes on them, in contrast to bank deposits, which significantly cut the percentage of income for early withdrawal.

Minuses

It can not be said that securities in the form of bonds- an ideal tool for investing. Investors, as a rule, invest in them in order to save money, but not to multiply. In crises and periods of instability, competent financiers do not invest in shares of companies whose stock quotes can "merge" all capital. They prefer to invest in these same firms, but precisely in bonds, as the income on them will be guaranteed, unless, of course, they do not go bankrupt at all. The minuses of bonds include:

• A lower percentage compared to other investment instruments. But do not forget that the risks of losing them are also great.
• The lack of opportunities for investors to become a co-founder of the company and make a profit.

Reasons for the release

We explained what bonds are (bonds). These are securities sold on stock exchanges. They represent debt obligations. Companies resort to emission practice for the following reasons:

• Urgently improve the current state of affairs: pay on loans, liabilities, to avoid fines, penalties, etc.
• To buy the necessary batch of goods at a bargain price.
• The company lacks funds for development, and bank loans will be more unprofitable than bonds
• Seasonal factors of recession, etc.

If the government issues the bonds, it is notit means that it is bankrupt, you do not need to shout "guard, everything is gone". As a rule, all governments resort to a source of loans on the exchange. The reasons can be several:

• State revenues are received at a certain time: tax revenues, interstate tranches, renewal of licenses, and current expenses are ongoing.
• We need money for serious investment projects, which will bring much more profit than the expense on bonds.
• Fulfillment of other financial obligations, etc.