Did you know that when you invest in a company bond, you are not buying shares you are actually lending money to a business? In return, the company pays you interest regularly and promises to give back your original investment after a certain period. It’s a simple, predictable way to grow your money, especially if you prefer stable returns over market swings. Company bonds come in different types secured, unsecured, convertible, non-convertible each offering varying levels of risk and reward. Whether you’re a cautious saver or a seasoned investor, there’s likely a bond that fits your strategy.
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How company bonds work?
Let us break it down. When a company needs money to launch a new product, expand its operations, or refinance old loans it may choose to issue company bonds instead of borrowing from a bank. These bonds are offered to investors like you, who lend money to the company for a fixed term.
In exchange, the company agrees to:
Pay you interest at a pre-decided rate (called the coupon rate), usually every six months.
Return your full investment (also known as the face value) on the maturity date.
It is a win-win, the company gets the capital it needs, and you earn a steady income without worrying about stock market volatility.
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Types of company bonds
Not all company bonds are the same. There are several types based on how risky they are, whether they can be converted into shares, or if they’re backed by company assets. Here's a quick rundown:
Investment-grade bonds – Issued by financially strong companies with low risk.
High-yield bonds – Also called junk bonds, they offer higher returns but carry more risk.
Convertible bonds – These can be converted into a fixed number of company shares.
Callable bonds – The company can buy them back before maturity.
Secured bonds – Backed by company assets, so they’re less risky.
Unsecured bonds – Not backed by assets, also known as debentures, and slightly riskier.
