Economics Mutual Funds Questions
The main difference between an equity fund and a debt fund lies in the types of securities they invest in.
An equity fund, also known as a stock fund, primarily invests in stocks or shares of companies. These funds aim to generate returns by capital appreciation, which means the value of the stocks held in the fund should increase over time. Equity funds are considered higher risk investments as the value of stocks can fluctuate significantly in response to market conditions.
On the other hand, a debt fund, also known as a fixed income fund, primarily invests in fixed income securities such as government bonds, corporate bonds, or other debt instruments. These funds aim to generate returns through regular interest payments and the eventual return of the principal amount invested. Debt funds are generally considered lower risk investments compared to equity funds as they offer more stable returns.
In summary, the key difference between an equity fund and a debt fund is the type of securities they invest in, with equity funds focusing on stocks and debt funds focusing on fixed income securities.