Advantages and disadvantages of bonds

Advantages and disadvantages of bonds

Investing in the bonds of listed companies is less risky than investing in the shares of the same companies, but considering that bond transactions are carried out in the private sector, this investment has a little risk, and usually listed companies, when financing through debt bonds, take action They distribute bonds. For example, capital owners do not want to buy and invest in the bonds of bankrupt companies, because it is difficult to earn returns in these types of companies. Another disadvantage of investing in bonds is the lack of tax exemption in this type of investment compared to other types. Investments in bank deposits are similar investments.

Sukuk bonds

 and is forbidden. Islamic countries created Islamic bonds or sukuk to solve this problem. There are different types of Sukuk bonds, which we will mention below.

Lease papers

One of the most important types of Sukuk is rental sukuk, whose holder is the joint owner of a part of the property whose benefits have been assigned to the consumer or the borrower based on the lease agreement. In rental sukuk, the right to use the benefits of an asset or a set of assets is transferred from the owner to another person in return for the rental price. In these documents, the duration of the lease agreement is specified and the rent can be paid at the beginning of the period, or at the end of the period with monthly, quarterly, or annual due dates. Since rental sukuk represents the common ownership of a person, it can be traded in the secondary market at a price determined by the market components. Where To Cash Savings Bonds?

Murabahah papers

Another type of sukuk contract is murabaha bonds, which have been common among people since ancient times, and its purpose is a sale in which the seller informs the customer of the finished price of the goods, including the purchase price, transportation costs, maintenance, and other related costs. In the next step, he asks for an additional amount or percentage as interest. For example, the seller announces that he bought a product for a thousand tomans and is ready to sell it to the customer for a thousand hundred tomans or with a ten percent profit. In the Murabahah contract, if the seller (seller) lies in stating the purchase price or related costs, the customer will have the right to cancel. Murabahah contract can be concluded in the form of cash or credit, and if it is a loan, the interest rate is usually higher.

Mudarabah papers

Mudarabah literally means business with another's capital, and in the term it means that a person (owner) gives money (capital) to another (agent) and receives a certain share of his profit in return. It should be mentioned that the profit of Mudarabah bonds will completely depend on the profit of commercial activity. Although the profit of commercial activity can be predicted to some extent, but in practice it is subject to various factors that may be contrary to the predictions made. As a result, the interest of these bonds is completely variable and its amount is determined at the end of the financial period. Shia scholars, unlike Sunnis, consider Mudarabah contract exclusive to business, and for this reason, in Iran, this contract is concluded only in commercial processes.

Bonds

Partnership bonds are another method of financing based on Islamic principles, which have different types:

• Simple partnership papers

Simple partnership bonds do not change after publication, and at the end, the holder and issuer of the bonds can return the principal capital and profit from its use in the project. Based on this, the holder of partnership bonds becomes a partner in a specific project and after the implementation of the project, his relationship with the company issuing the bonds ends. Simple partnership bonds are considered the most common type of partnership bonds and are traded based on specific legal mechanisms, including guaranteeing the repayment of the principal and interest of the bonds, which have provided for the framework governing these bonds.These bonds are a suitable tool for the general public to participate in short-term investments because the owner of the bond can transfer it or present it to the issuer.

• Composite bonds

Compound bonds are issued by public companies and are classified into the following two types:

A) Partnership bonds that can be exchanged for shares :

These bonds are issued by public companies and are exchanged at the final maturity with the shares of other companies admitted to the stock exchange organization.

b) Partnerships that can be converted into shares : 

These bonds are issued by joint-stock companies and are converted into shares of companies that issue bonds at maturity or at the time of capital increase. Due to the fact that the regulations of this type of partnership bonds are completely modeled on the former regulations of bonds that can be converted into shares by the legislator after the Islamic revolution; In this case, the owner of bonds can benefit from the improvement of the company's economic condition by converting his bonds into shares if the company is profitable and the economic situation is good.