The smart way to choose between debt and equity

Imagine equity as a slice of a delicious pie, representing ownership shares of a company. If you hold equity, you’re a shareholder, savouring both the sweet profits and occasional bitter losses.

Debt, on the other hand, is like a loan your friend takes from you, promising to pay back with interest. Companies or countries borrow sums at specific interest rates using instruments like bonds, notes, and commercial papers.
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Now that we’ve got a grip on equity and debt, let’s dive into the world of equity and debt mutual funds!

Equity Funds

According to SEBI, an equity fund is a scheme investing 65% of its assets in equity or related instruments.

Equity funds can be broadly classified by

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Style of management

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Market cap and sector of the equities in the fund

Taxation for equity funds

Debt Funds

Debt funds invest in corporate or government bonds, treasury bills, and other fixed-income securities.

Debt funds can be classified based on

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The type of securities they invest

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The maturity of the securities they invest

Taxation for debt funds

The big question: Where should you invest?

Think about buying a car. What factors would you consider before making your decision?

• Comfort
• Aesthetics
• Speed
• Mileage
• Fuel type (EV or Petrol)

There are a number of car models available, but not everything satisfies your expectations. It is almost the same with mutual funds, not every fund serves your purpose.

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Consider the following factors and keep your expectations clear:

• Risk Appetite: Are you a dare devil ready for high risks, or do you prefer playing it safe?
• Investment Duration or Purpose: How long can you commit your money, and what’s your investment goal, retirement, children’s education, or something else?
• Return Expectations: Keep you expectations clear about kind of returns are you aiming for?

Usually, an investor’s portfolio blends Debt and Equity investments based on their financial goals.

Where to buy mutual funds?

You can easily buy and track mutual funds on broker platforms like Coin by Zerodha, Groww, 5 Paisa, and more.