Trust Certificate

A “trust certificate” is a secured bond that’s backed by other assets. What this means is that if a company has issues making payments on its bonds, those “other assets” (think: collateral) can be seized and sold, and the profits can be distributed back to the bondholders.

It’s a nice little extra layer of protection for the investor, but that extra protection comes at a price: trust certificates don’t earn as much as other, less safe investment options. But on the plus side, if we purchase a trust certificate in a certain company and it goes under, we get paid first from whatever comes out of the bankruptcy. That’s right: investors with secured debt get first dibs on post-bankruptcy liquidated assets.