In the world of investments, where choices are aplenty, and risks must be carefully weighed, debt investments, have emerged as a compelling option for investors seeking stability and consistent returns. These funds are investment vehicles that primarily invest in fixed-income securities, such as long-term bonds, and aim to generate stable returns by earning interest income from the underlying investments.
Debt investment generaaly refers to an investment where an investor lends money to an entity (such as a corporation, government, or individual) in exchange for the promise of repayment of the principal amount along with interest. Essentially, the investor becomes a creditor, and the entity borrowing the money becomes a debtor. These investments do not grant ownership in the entity but offer fixed returns through interest payments.
Debt investments are generally considered safer than equity investments (stocks) because creditors have a higher claim on assets in case of bankruptcy. However, the returns tend to be lower than the potential returns from equity investments.
