Not all debt instruments are created equally. While you may make the same amount of investment for the same tenure, the financial consequences of it can be vastly different depending on which debt instrument you invested in. In this premium article, we explore the different forms of debt instruments by going over their critical features – interest rate, tenure, eligibility, safety, and more. After this objective analysis and comparison of various debt instruments, you will be more confident in making the right investment decision for portfolio.
COVID-19 caught the world completely blindsided, and one fallout of the pandemic has been a prolonged global economic slowdown. In such times of uncertainty, many prefer to invest in debt instruments. These are considered safer than equity instruments, as the latter tend to be volatile in nature. There are multiple types of debt instruments, so it’s easy to be confused. Here’s a quick guide to help you understand the different types and which one is best suited to your needs.
Types of debt instruments
Debt instruments have been broadly classified into four categories:
Government securities like Public Provident Fund (PPF), National Savings Certificate (NSC), Kisan Vikas Patra (KVP), floating rate savings bonds etc.
Bank fixed deposits (FDs)