What’s the difference between debt, equity and convertible bonds?

Invesdor offers three financial instruments: debt, equity and convertible bonds. We offer these instruments because we want our investors to be able to diversify their portfolios efficiently with us.

Each instrument has its place since they are serving various purposes in an investor’s portfolio. We always encourage our investors to diversify their investments with different instruments, without forgetting to diversify internationally.

Let us walk you through our three investment instruments and help you assess which type suits your investment strategy.

Fixed-interest investments

Fixed-interest investments, bonds, are a way to generate consistent income. They provide regular interest payments, offering predictability for your investment portfolio.

At Invesdor, we specialize in bonds that deliver competitive returns — offering annual interest rates of up to 12%.

Key features of fixed-interest investments

• Predictable returns: Bonds provide regular interest payments throughout the term, helping you plan your cash flow.
• Defined term and repayment: At the end of the investment term, your initial capital is repaid in full, along with any remaining interest.
• Diverse opportunities: Fixed-income investments can complement equity investments, bringing balance and diversification to your portfolio.

Equity investments

Equity investments offer the opportunity to share in the growth and success of a company as a co-owner. By investing in equity, you align with the company’s long-term potential, gaining access to high returns in events like a sale or IPO.

Key features of equity investments

• High return potential: Equity investments allow you to benefit from the company’s value growth, unlocking significant returns during major milestones like an IPO or acquisition.
• Aligned with founders and key investors: As an equity investor, you participate in the company’s journey alongside its founders and main stakeholders, sharing directly in its successes.
• Profit participation: Equity holders are entitled to their share of the company’s profits, whether through dividends or the eventual sale of the business.

Convertible bonds

A convertible bond is often used when a company’s valuation is uncertain or yet to be determined. Like a traditional bond, it accrues annual interest, but instead of a fixed repayment, it is typically converted into shares at a discount when a predefined conversion event occurs.

Key features of convertible bonds

• Equity instrument: designed to convert into shares rather than remain a fixed-income investment.
• Investor compensation: investors earn interest as compensation for the time their capital is invested.
• Conversion events: may be mandatory (triggered automatically) or optional (investor choice). Check the funding round’s KIIS (Key Investment Information Sheet) for further information.
• Principal conversion: only the original principal amount, not compounded interest, is converted into shares upon conversion.
• Repayment at maturity: if no conversion occurs, the principal and accrued interest are repaid to investors.

Which investment instrument is the right one for me?

Consider your investment horizon. In an ideal world, you have investments serving short-term returns and others serving long-term returns.

Short-term investment strategies focus on generating quick returns, often within a few months to a couple of years. These investments prioritize liquidity and lower holding periods. Long-term investment strategies, on the other hand, aim to build wealth over several years or decades.

Recap of Invesdor’s investment instruments

• Bond investments are particularly appealing to those seeking a steady income stream with defined terms and repayment schedules.
• Equity investments are ideal for those seeking higher returns and who are ready to join a company’s growth story, taking on a share of the risk for the potential of significant rewards.
• Convertible bonds are often used when a company’s valuation is uncertain or yet to be determined. From an investor’s perspective, convertible bonds offer potential upside while mitigating some risks associated with early-stage investments.

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