Mutual funds are broadly of two types based on the assets they invest in: equity mutual funds and debt mutual liquids. The variety offered by the various mutual funds ensure that investors from all walks of life and with their diverse income levels can find the right investment option that caters to their needs.

Let’s first understand what a debt mutual fund is: A debt mutual fund is a fund which mainly invests in a combination of debt or fixed-income securities. Fixed-income securities can be Government Securities (G-Secs), Treasury Bills, corporate bonds, money market instruments and other various securities with varied time horizons.

Usually, debt securities have a fixed maturity date and pay a fixed rate of interest. Hence, they are considered stable and safe investment options.

Moving on to equity funds. Equity funds, as the name suggests, are the mutual funds that invest in shares of public limited companies. Equity mutual funds can be classified by their size, investing style, market capitalisation, etc.

Equity mutual funds are excellent investment options for those who want to participate in the equity market but are unaware of how to go about it or don’t have enough knowledge to invest in individual stocks.

You are young, so you can afford to take relatively more risk than a person who’s 45 or 50. So opt for equity mutual funds.

You have just begun your career and with age on your side, you will stand to benefit from the magic of compounding and create long-term wealth. Happy investing to you!