Shares vs. Debentures: Know the Difference
By Shumaila Saeed || Updated on December 25, 2023
Shares represent ownership in a company, offering voting rights and dividends, while debentures are debt instruments paying fixed interest, without ownership.
Key Differences
Shares are units of equity ownership in a corporation, providing shareholders with a claim on part of the company's assets and earnings. Debentures, in contrast, are a type of debt instrument issued by companies to raise capital, offering fixed interest payments but no ownership stakes or voting rights in the company.
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Nov 22, 2023
The value of shares fluctuates based on the company's performance and market conditions, making them riskier but potentially more rewarding. Debentures, however, offer a fixed rate of return through interest payments, making them less risky but typically offering lower returns compared to shares.
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Nov 22, 2023
Holders of shares are entitled to dividends, which are a portion of the company's profits, and have voting rights at shareholder meetings. Debenture holders, on the other hand, receive regular interest payments and are prioritized over shareholders for repayment in case of company liquidation, but they do not have voting rights.
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Nov 22, 2023
Shares can be of various types, like common or preferred, each with different rights and levels of risk. Debentures can be secured or unsecured, with secured debentures having collateral backing and unsecured ones relying solely on the issuer's creditworthiness.
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Nov 22, 2023
Shares offer potential capital gains through price appreciation and are suitable for investors seeking growth. Debentures are more suitable for conservative investors seeking steady income and lower risk, as they provide regular interest income without the volatility associated with equity markets.
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Nov 22, 2023
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Comparison Chart
Rights
Voting rights, claim on assets.
No voting rights, claim on repayment.
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Nov 22, 2023
Suitability for Investors
Suitable for risk-tolerant investors.
Suitable for risk-averse investors.
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Nov 22, 2023
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Shares and Debentures Definitions
Shares
Often provide voting rights in company decisions.
As a shareholder, he voted on major company policies.
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Nov 17, 2023
Debentures
A type of long-term debt instrument.
The corporation issued debentures to finance its new factory.
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Nov 17, 2023
Shares
May yield dividends, a share of company profits.
This year, her shares brought substantial dividends.
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Nov 17, 2023
Debentures
Can be secured or unsecured.
The bank opted to purchase secured debentures from the firm.
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Nov 17, 2023
Shares
Represents a claim on a company's assets and earnings.
His shares in the company entitled him to a portion of its profits.
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Nov 17, 2023
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Debentures
Does not confer ownership or voting rights.
Holding debentures in the company, he had no say in its management.
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Nov 17, 2023
Shares
Units of ownership in a company.
Buying shares in a tech company made her part-owner of it.
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Nov 17, 2023
Debentures
Prioritized over equity in case of liquidation.
In the company's liquidation, debenture holders were paid first.
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Nov 17, 2023
Shares
Can be traded on stock exchanges.
She frequently trades shares on the New York Stock Exchange.
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Nov 17, 2023
Debentures
Provides fixed interest payments to holders.
Her income included interest from several debentures.
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Nov 17, 2023
Shares
A part or portion belonging to, distributed to, contributed by, or owed by a person or group
The pirates argued over their shares of the treasure.
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Oct 19, 2023
Debentures
An unsecured bond issued by a civil or governmental corporation or agency and backed only by the credit standing of the issuer.
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Oct 19, 2023
Shares
One of the equal parts into which the capital stock of a company is divided
Bought 200 shares of the company's stock.
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Oct 19, 2023
Debentures
A customhouse certificate providing for the payment of a drawback.
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Oct 19, 2023
Shares
A unit of ownership in a mutual fund or other investment vehicle
Bought two shares in a mutual fund.
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Oct 19, 2023
Shares
Shares Chiefly British Stocks
European shares jumped two percent. The fund invests half the money in bonds and half in shares.
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Oct 19, 2023
Shares
To accord a share in (something) to another or others
Shared her chocolate bar with a friend.
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Oct 19, 2023
Shares
To divide and parcel out in shares; apportion
Shared the estate among his heirs.
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Oct 19, 2023
Shares
To participate in, use, enjoy, or experience jointly or in turns
Share a responsibility.
Share a room.
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Oct 19, 2023
Shares
To hold or have jointly with another or others
She shares my view about the election.
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Oct 19, 2023
Shares
To relate (a secret or experience, for example) to another or others.
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Oct 19, 2023
Shares
(Computers) To make (a digital file) accessible to other users on a network, as for copying and downloading.
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Oct 19, 2023
Shares
To allow someone to use or enjoy something that one possesses
Being in daycare taught the child to share.
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Oct 19, 2023
Shares
To use or enjoy something jointly or in turns
There is only one computer, so we will have to share.
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Oct 19, 2023
Repeatedly Asked Queries
Are debenture holders entitled to company profits?
No, debenture holders are creditors who receive fixed interest payments, regardless of company profits.
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Nov 22, 2023
Do shares provide regular income?
Shares can provide income through dividends, but these are not guaranteed and depend on the company's profits.
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Nov 22, 2023
What are shares?
Shares represent ownership in a company, entitling the holder to a portion of the profits and voting rights.
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Nov 22, 2023
How do shares differ from debentures?
Shares denote ownership in a company, while debentures are a form of debt without ownership rights.
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Nov 22, 2023
Is there a risk involved in buying shares?
Yes, shares carry the risk of fluctuating in value and potential loss, depending on the company's performance.
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Nov 22, 2023
Do debenture holders have voting rights in the company?
No, debenture holders do not have voting rights as they are creditors, not owners.
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Nov 22, 2023
What are debentures?
Debentures are a type of long-term debt instrument used by companies to borrow money, paying a fixed rate of interest.
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Nov 22, 2023
Are debentures a safer investment than shares?
Generally, debentures are considered safer than shares as they offer fixed returns and have priority over shareholders in case of liquidation.
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Nov 22, 2023
Do debentures have a maturity date?
Yes, debentures have a fixed maturity date when the principal amount is repaid to the holders.
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Nov 22, 2023
Can shareholders influence company decisions?
Yes, shareholders often have voting rights and can influence major company decisions.
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Nov 22, 2023
What happens to shares during a company's liquidation?
In liquidation, shareholders are the last to be paid, often losing their investment if funds are insufficient.
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Nov 22, 2023
What is the meaning of 'dividend' in context of shares?
A dividend is a portion of a company's profits distributed to shareholders.
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Nov 22, 2023
How does share price fluctuation impact investors?
Share price fluctuations can lead to capital gains or losses for investors, depending on market conditions.
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Nov 22, 2023
What is the risk of default for debenture holders?
The risk of default exists if the issuing company faces financial difficulties and cannot meet its interest or principal repayments.
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Nov 22, 2023
What does 'interest payment' mean for debentures?
Interest payment on debentures is the regular fixed amount paid to debenture holders, representing the cost of borrowing.
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Nov 22, 2023
Can shares be traded in the stock market?
Yes, shares are commonly traded on the stock market, allowing for liquidity and price discovery.
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Nov 22, 2023
What are preference shares?
Preference shares are a type of share that gives holders priority over common shareholders in dividend payment and during liquidation.
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Nov 22, 2023
Are debentures traded like shares?
Debentures can be traded in the bond market, but they are generally less liquid than shares.
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Nov 22, 2023
Can shares be converted into debentures?
No, shares and debentures are distinct financial instruments and cannot be directly converted into each other.
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Nov 22, 2023
Are debentures secured or unsecured?
Debentures can be either secured (backed by assets) or unsecured (not backed by specific assets).
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Nov 22, 2023
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About Author
Written by
Shumaila SaeedShumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.
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