Loans against securities are made against securities such as-
- Debentures that aren’t convertible- Non-convertible debentures are classified as debt. They cannot be converted into stock or equity. NCDs have a fixed maturity date, and the attention can be paid monthly, quarterly, or yearly, depending on the fixed tenure stipulated. When compared to convertible debentures, they provide superior returns, liquidity, low risk, and tax advantages to shareholders. You can buy NCDs when the company announces them or after they trade on the secondary market. You must investigate the firm’s credit rating, the credibility of the issuer, and the coupon rate of the NCD. It would be beneficial if you purchased NCDs with higher ratings, such as AAA+ or AA+.
- UTI Bonds- UTI Bond Fund is a medium to long-term open-ended fund that makes investments in a diversified portfolio of high-quality corporate bonds and government securities. The fund is suitable for investors who have a three-year or longer investment plan.
- Insurance policies- An insurance policy is a contract between you and your insurer that details the coverage they’ll offer you, others in the policy, your belongings, and your location. It’s also recognized as a contract of adhesion (like glue) because you agree to adhere to the terms and conditions of the contract.
- Bonds issued by NABARD- In March 2016, NABARD approved Rs.5,000 crore in tax-free bonds with maturities of 10, 15, and 20 years. The bonds were rated ‘IND AAA/Stable by India Ratings, and ‘CRISIL AAA/Stable’ by Credit Rating Information Services Of India Limited (CRISIL). This implies that the bonds were given the highest rating for safety and the capacity of the organizations to meet their financial commitments. The credit risk of the securities is low.
- Mutual Fund Units- Mutual fund schemes are pools of investment collected from volunteers who want to participate in a country’s growing financial market, which has the potential to provide exceptional returns. These instruments are the simplest way to gain exposure to stocks and bonds while also providing benefits such as diversification, asset allocation, and professional management. Unlike purchasing stocks on the primary or secondary market, you can purchase mutual fund units in fractions. While your stock ownership may be in fractions due to corporate actions such as stock splits, purchases in financial markets are made in whole units rather than in parts.
- Demat shares- Dematerialization, also known as Demat, is the way of transforming physical share certificates into electronic balances for a company’s shareholders. Shareholders are frequently encouraged by investors to transform their physical certificates into Demat shares. In some instances, it is also needed for businesses looking to raise equity funds.
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