Investments in debt are a great way to secure future returns without the risks of equity investments. They typically have a pre-determined rate of return and a set maturity date. This means that you’ll have a fixed monthly payment and can track your investments over time. Unlike equity investments, which tend to have a fluctuating public market and difficult to track, debt investments tend to pay off faster.
Debt investing has been around for a long time. It was once the domain of large banks, but new investments in debt have made it more accessible to smaller investors. However, before investing in debt, it’s important to understand the risks associated with debt ownership. It’s also important to understand how debt investment works.
The most common form of debt investment is the bond. Bonds were first made famous during wartime when governments needed capital for their war efforts. Since then, governments have sold them to encourage citizen investment. With bonds, investors can buy government-issued debt that is guaranteed to be paid back at a certain rate of interest. Although bonds are a common form of investment, they come with many risks. For example, higher credit-rated corporations will often pay bond holders less interest than their unsecured counterparts.
Investments in debt may not provide the same level of excitement as equity investments, but they can be a crucial part of portfolio growth in volatile markets. By understanding what debt-based investments are and how they differ from equity investments, you can find a great investment to fit your strategy. Mainvest is one example. Its platform allows investors to buy revenue-sharing notes for $100.