Convertible bond. Convertible bonds are corporate bonds that give you the alternative of converting their value into common stock of that company or redeeming them for cash when they mature.

The details governing the conversion, such as the number of shares of stock you would receive, are set when the bonds are issued.

A convertible bond has a double appeal for investors. Its market value goes up if the stock price rises, but falls only to what it would be as a conventional bond if the stock price falls. In other words, the upside potential is considered greater than the downside risk.

While convertible bonds typically provide lower yields than conventional bonds from the same issuer, they may provide higher yields than the underlying stock.

You can buy convertibles through a broker or choose a mutual fund that invests in them.

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debenture

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debenture definition

de·ben·ture (di ben′c̸hər)

noun

1. a voucher or certificate acknowledging that a debt is owed by the signer
2. a customhouse order for payment of a drawback, as to an importer
3. an interest-bearing bond issued against the general credit of a corporation or governmental unit, with no specific pledge of assets

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A Debenture is a share that is more a loan with a fixed rate or interest payable and also takes precedence over preferred and common stock dividends.

The capital of a company is divided into a number of very small units called shares. The person who holds a share is a share holder and he is a debtor of a company(ie) he is liable to all the assets and liabilities of that company. The return on investment of a share is dividend. Dividend is not fixed to a particular percentage. A shareholder can participate in the management of the company. A share holder can vote during company meetings.
A debenture is an acknowledgement stating the debt of a company. A holder of a debenture is a creditor of the company. when the company is being wound up the debtors should be given first preference during the repayment of capital. The return on investment of a debenture is interest. interest is fixed to a particular percentage. A debenture holder cannot participate in the management of the company. A debenture holder cannot vote during the company meetings.

A debenture is an unsecured loan you offer to a company. The company does not give any collateral for the debenture, but pays a higher rate of interest to its creditors. In case of bankruptcy or financial difficulties, the debenture holders are paid later than bondholders. Debentures are different from stocks and bonds, although all three are types of investment. Below are descriptions of the different types of investment options for small investors and entrepreneurs.

Debentures and Shares
When you buy shares, you become one of the owners of the company. Your fortunes rise and fall with that of the company. If the stocks of the company soar in value, your investment pays off high dividends, but if the shares decrease in value, the investments are low paying. The higher the risk you take, the higher the rewards you get.

Debentures are more secure than shares, in the sense that you are guaranteed payments with high interest rates. The company pays you interest on the money you lend it until the maturity period, after which, whatever you invested in the company is paid back to you. The interest is the profit you make from debentures. While shares are for those who like to take risks for the sake of high returns, debentures are for people who want a safe and secure income.