What is the difference between equity investments and debt investments?

The difference between equity investments and debt investments in Washington is an important distinction to understand. Equity investments allow you to purchase a portion of a company or asset and then share in the potential upside of appreciation in value, dividend payments, or other benefits the asset(s) may produce. Debt investments are typically used to purchase bonds or other financial instruments that give investors the right to receive scheduled payments of interest and principal. With an equity investment, investors own a portion of a company or asset and then receive a return based on the performance of that asset. This type of investment is considered higher risk for the investor, and higher rewards are potentially offered in exchange for that risk. Debt investments involve the investor loaning money to a company or government. In exchange for that loan, the investor is provided with a set payment schedule, and at the end of the term, a certain dollar amount is returned to the investor. The investor does not own a portion of the company or asset, but rather is only repaid according to the pre-determined plan. Debt investments are considered to be lower risk, meaning investors have a set return with less risk of upside or downside.

Related FAQs

What are the benefits of having a professional financial advisor manage investments?
What are the restrictions imposed by foreign exchange controls?
What are the legal restrictions imposed on insider trading?
What is the role of a certified financial planner in the investment process?
What are the legal requirements for a company to be listed on a stock exchange?
What are the legal responsibilities of an investor when making investments?
What are the risks associated with investing in derivatives?
What is the role of a trust in the management of investments?
What are the legal restrictions for foreign investors when investing in a domestic market?
What is the importance of a custodian bank in protecting investments?

What is the difference between equity investments and debt investments?

Related FAQs

Related Blog Posts