Stock Market Investment What is the difference between Equity,Debt and Balanced Fund? Suprika

Equity is more risky, because it's depends on the behaviour and fluctuation of share price of the respective scrip, so you cannot expect fixed return in equity. Debt gives you fixed return, incase of any global turmoil or economic slowdown, so it's less risky compared to equity. Balanced Fund means it's a combination of both equity and debt funds in the investment portfolio. read less

An equity fund invests it money primarily in equity instruments i.e. share market. Equity refers to ownership interest in a company. As a owner, the rate of return that you get completely depends on the stock market performance of the company. Thus your returns are variable and risky. However, over a longer term these funds also provide much better returns that debt funds. Debt funds invest in the bond market. Bond market are financial instruments that provide (on most occasions) a fixed interest to the investor and a fixed principal on maturity (pretty much like any loan). Unless a company goes bankrupt, the investments are fairly safe. Debt funds also invest a significant part of their funds in government bonds which are almost free of any default risk. Thus debt funds are less riskier than equity funds but in turn also provides lesser return (remember: high risk follows high return and low return follows low risk) A balanced fund invest part of their money in equity and part of their investments in Debt. Thus, in terms of return and risk, they fall somewhere in between. read less

An Equity fund is a fund that invests mainly in stock/shares of companies with some amount cash in hand (a small percentage, ofcourse). Investors with moderate to high risk appetite can go for this option. Debt funds invest in fixed income securities like Govt. Securities (G-Sec's), Bonds issued by govt & PSU companies & corporate, treasury bills etc. all fixed income securities are vulnerable to changes in interest rate, as prices of securities can fluctuate depending on the impact of the changes. A Balanced Fund is targeted at investors looking for a mixture of safety, income and some moderate capital appreciation. Funds are invested into each asset class which remain within a set minimum and maximum parameters. read less

Hi Suprika, All these three are different types of investment options. Now primarily it depends on the risk appetite, goal for which the investment is being done and duration of the investment decides where to invest out of these three different options. Equity - It is nothing but shares which means if a person is investing in equity of a company - he/she will get the ownership of the company by the number of shares he/she owns. In this case, if the company does well - the equity of the company will do well - the share price of the company goes up and hence the investor will make money and vice versa. This is the reason one has to understand the business of the company before purchasing its equity otherwise it can be too risky. But if some person understand the business and invests into its shares, it can prove to be the best way to make money as well. In short its like MORE RISK MORE RETURN Debt - Debt funds invest in the bond market. Its a financial instrument that provides a fixed interest to the investor and a fixed principal on maturity. It acts almost like a Fixed deposit of a bank. It is a safer way of investing where the investor will get a certain percentage per annum on its principal amount. In short its like LESS RISK LESS RETURN Balanced Fund - Balanced funds are the mutual funds which consists of both equity and debt in almost equal proportion. In this case we will be investing or giving our money to fund managers who are very highly informative and knowledgeable and they will take the decision on our behalf of what all equities and debt instruments they have to purchase so that the fund will do good. In short - its MEDIUM RISK MEDIUM RETURN. read less