New Delhi, Sept. 1 -- Bonds and debentures are fundamental components of fixed-income investments. Both present aspirational investors with unique opportunities, risks, and varying returns. That is why clearly understanding them and acknowledging their differences will help investors make sensible investment decisions according to their long-term goals, risk-taking potential, and tolerance.

A bond is simply a fixed-income instrument in which an investor lends funds to an organisation or government. The bond issuer takes these funds with the promise of regular interest payments and repayment of the principal amount upon maturity. Bonds are generally guarded by collateral or government backing, making them safer compared to other investmen...