Debt Investment is an excellent choice for investors because it usually has a high safety rating because the issuing company backs it. Moreover, this type of investment also enables you to predict your cash flow. You can pick the bonds that best match your personal needs and goals. It is a safe way to invest your money and provides a high yield compared to fixed deposits.
However, unlike other investments, debt investments do not offer the same kind of liquidity. The duration of a debt investment is often much shorter than that of an equity investment. This means that if you have high liquidity requirements, debt may not be the best option for you. Equity investors are generally more risky and their hold periods may last five or more years.
While most debt investments do not offer very high returns, debt investments offer investors the security of a fixed interest rate and a shorter payback period. These benefits mean that they can compete with many of the more popular investment measures. For example, Mainvest’s investments have consistently delivered an IRR between 29.9%-35%, while paying investors back early.
Debt investments have their risks, so you should choose your investments carefully. Look for loans from proven originators. Also, make sure you choose investments that are backed by liquid collateral. The loan-to-value ratio is another important factor to consider when making a decision on which investment to make. The higher the loan-to-value ratio, the riskier the investment.