What is the difference between a bond and a debenture?

What is the difference between a bond and a debenture Introduction: The World of Financial Instruments Hello, and welcome to our video on the difference between a bond and a debenture. In the vast realm of financial instruments, these two terms often crop up, leaving many investors perplexed. Today, we'll shed light on their unique characteristics, enabling you to navigate the investment landscape with confidence. Defining Bonds: The Bedrock of Fixed Income Let's start with bonds. In essence, a bond represents a loan made by an investor to a borrower, typically a corporation or government entity. It's a fixed-income instrument, meaning it offers regular interest payments, usually at a predetermined rate, known as the coupon. Bonds have a specified maturity date, at which point the principal amount is repaid. They're considered relatively low-risk, making them a popular choice for conservative investors. Unraveling Debentures: A More Flexible Alternative Now, let's turn our attention to debentures. Like bonds, they're debt instruments. However, debentures lack the collateral that bonds often possess. This absence of security makes debentures riskier than bonds.