What is the difference between equity and debt funds?
Rachel Hernandez
Updated on March 14, 2026
The difference between the two comes from where the money is invested. While debt funds invest in fixed income securities, equity funds invest predominantly in equity share and related securities.
Likewise, which is better debt or equity mutual fund?
Since debt funds invest money in treasury bonds, there's much less risk associated with them. Debt funds are good investment option when market is volatile. Equity: Equity mutual funds give good returns over the long period to time as compared to debt funds. Equity funds are good when the markets are booming.
Furthermore, what is the difference between liquid fund and equity fund? While some funds may be a combination of more than one type of fund, if a fund invests more than 65% of its portfolio in stocks, it is generally considered as equity fund. Liquid funds meanwhile are open ended schemes that invest in debt and money market instruments with maximum maturity of up to 91 days only.
Additionally, how do you know if a mutual fund is equity or debt?
An equity mutual fund is basically a mutual fund that invests only in equities (shares of listed companies). A debt mutual fund is a mutual fund that invests in fixed income securities (bonds, debentures). Purchasing fixed income securities is like loaning a company money and getting paid interest on it.
Which equity fund is best?
5. Top 5 Best Equity Mutual Funds in India
| Fund Name | Returns | Link |
|---|---|---|
| ICICI Prudential US Bluechip Equity Fund | 18.18% | Invest Now |
| Axis Bluechip Fund | 16.96% | Invest Now |
| Aditya Birla Sun Life Banking & Financial Service Fund | 16.44% | Invest Now |
| SBI Banking & Financial Service Fund | 16.29% | Invest Now |
Related Question Answers
Which fund is best to invest?
Here is the list of schemes:- Axis Bluechip Fund.
- ICICI Prudential Bluechip Fund.
- L&T Midcap Fund.
- HDFC Mid-Cap Opportunities Fund.
- L&T Emerging Businesses Fund.
- HDFC Small Cap Fund.
- Motilal Oswal Multicap 35 Fund.
- Kotak Standard Multicap Fund.
What is Blue Chip Fund?
A Blue chip fund is a term used to indicate well-established and financially sound companies. Blue chip funds invest in stocks of those companies that have a credible track record with sound financials along with regular dividend payments and profitability over the years.Are debt funds tax free?
Long term capital gains upto Rs 1 Lakh is totally tax free. Tax on debt mutual funds - The minimum holding period for short term capital gains in debt funds is 3 years. Short term capital gains (if the units are sold before three years) in debt mutual funds are taxed as per applicable tax rate of the investor.Is debt or equity safe?
A SAFE Should Not Be Treated as Debt for Tax Purposes Many instruments bear indicia of both debt and equity. For example, in certain circumstances, convertible debt may be treated as equity for tax purposes. However, it seems clear that a SAFE should not be treated as debt for U.S. federal income tax purposes.What are equity funds with examples?
Other equity funds include: Hybrid funds, which generally invest in equities but also invest in bonds. Specialty funds, which invest in stocks meeting certain criteria (such as geographic region, industry sector, social causes, etc.). Sector funds, which invest in specific stock groups, often within one industry.How does equity mutual funds work?
How an equity mutual fund works is actually quite simple. You give money to a fund, and the fund invests this money in stocks. The gains or losses, whatever they may be, accrue to you. Equity funds are legally permitted to charge up to 2.25 per cent per annum of the money it manages as its expenses.Is Liquid Fund better than FD?
Liquid funds are offering 6.89 per cent in the last one year, compared to 7 per cent offered by most bank fixed deposits. Liquid funds are least risky among debt mutual funds and they have the potential to offer marginally higher returns than bank deposits as the returns are linked to the market.What are the liquid funds?
Liquid fund is an open-ended debt mutual fund scheme, ideal for short-term investments. It invests primarily in money market instruments like Certificate of deposits, T-Bills, Commercial papers and Term deposits. Maturity of the fund is 3-6 months. Investors can enter/exit the scheme whenever desired.Is it good to invest in liquid funds?
Liquid funds are high liquidity open-ended income schemes that invest in debt and money market instruments such as government securities, treasury bills and call money among others. These instruments have a maximum maturity period of 91 days and are considered safe because they mitigate interest rate volatility risk.Is liquid fund risk free?
Although liquid funds are not entirely risk-free, however, they are low risk-low returns instruments. As they invest predominantly in debt instruments, they are subject to interest rate risk and credit risk. Liquid funds ensure that your money is invested only in superior creditworthy instruments.Which liquid fund is best in India?
List of Top 5 Best Liquid Funds to Invest in 2019-20| Fund Name | 1 Year | 3 Year |
|---|---|---|
| ICICI Prudential Liquid Fund | 7.63% | 7.19% |
| Aditya Birla Sun Life Liquid Fund | 7.63% | 7.19% |
| Kotak Mahindra Liquid Scheme | 7.40% | 7.12% |
| Reliance Liquid Fund | 7.63% | 7.19% |
