Equity Funds are funds that majorly comprises of equity investment in public limited companies. This can be in large-cap, mid-cap, or small-cap companies, or a mix of two. These are directly related to the stock market and hence the risk is also directly related to the market. However, if invested for a longer period one can attain return greater than inflation. So, investors that are ready to stay for a longer time to get a good return can invest in the equity fund.
Debt Funds invest primarily in debt instruments that give a fixed level of income Investors that are risk-averse and are looking for fixed periodic investment in long-term should invest in Debt Funds. Investors that want a regular income should invest in Debt funds.
Balanced funds is a hybrid fund that invests in equity and debt thus benefiting from steady income of debt funds and attaining growth from equity. Investors that are moderate risk-taker can invest in balanced funds.
Liquid funds invest in a short-term market debt instrument that have a maturity of short tenure, ranging from 91 days to 1 year. Investors with short-term investment goal can invest in liquid funds.
Your decision to invest in these funds depending upon the risk you are ready to take.