What is the difference between equity funds and debt funds?
Mutual funds come in handy for various investment needs, taking into account factors like time, risk, and financial goals. Investors have different risk appetites based on their life stage and financial situation. To pick the right mutual fund, comparing equity and debt funds is crucial.
Equity funds invest in stocks, aiming for capital appreciation and dividends. They are riskier but offer higher returns over the long term. They are categorised by market capitalisation—large cap, mid cap, small-cap, etc. On the other hand, debt funds primarily invest in debt and money market instruments, providing income through interest payments. Debt funds are less risky compared to equity.
The main differences lie in risk, returns, and investment tenures. Equity involves higher risk but can yield superior long-term returns. Debt funds have lower to moderate risk, suitable for shorter durations. The choice depends on your risk tolerance and financial goals.
Debt funds have different …
