Equity Mutual Funds vs. Debt Mutual Funds: Which Are the Best for SIP?



Investing your hard-earned money is not an easy decision, it is a tough one. One should adequately research and develop the ifs and buts of it, then move ahead with the same. Suppose you are looking for the “best mutual fund to invest today” on your search engine; you’ll end up with several results. 

Long gone are the days when people actually used to waste a lot of energy and time by researching physically regarding investments from one bank to another. Nowadays, you and your smartphone are literally more than enough. 

What are mutual funds?

As the term implies, it is basically the money pooled in by a large number of people (or investors). A Professional Fund Manager totally manages this, so you don’t have to worry about anything as your hard-earned money is in safe hands.

Furthermore, here, the money is collected from a number of investors who share a common investment objective. Then, it invests the money in bonds, equities, money market instruments etc., etc. The income generated from this collective investment of best performing mutual funds is distributed proportionately amongst the investors after deducting certain expenses. 

What is an Equity Mutual Fund?

It is a type of mutual fund that primarily invests in stocks or equities of publicly traded companies. They specialize in investing in stocks, which represent ownership shares in companies and are designed to provide investors with an opportunity to participate in the potential growth of the stock market. 

Further, it offers diversification by investing in a wide range of stocks across different sectors as well as industries, ultimately reducing the big risk associated with holding a single stock. 

What is a Debt Mutual Fund?

It is a type of investment fund that invests in a portfolio of fixed-income securities, such as government bonds, corporate bonds, money market instruments, etc. These are managed by professionals and aim to provide investors with relatively stable returns through interest income and, in some cases, even capital appreciation. 

Equity Mutual Funds vs. Debt Mutual Funds: Which Are the Best for SIP?

This factor totally depends on your financial goals, investment horizon, and risk tolerance. However, always research and make sure that you invest in the best mutual funds for sip

Equity Mutual Funds for SIP

  • Long-Term Growth

Equity funds are generally ideal for long-term wealth creation. If your investment horizon is five years or more and you can also tolerate the fluctuations of the market, equity SIPs can undoubtedly provide higher returns due to the growth potential of stocks. 

  • Diversification

It offers diversification by investing your hard-earned money in a variety of stocks across sectors and industries, spreading risk. 

  • Higher Risk and Volatility

These are riskier and much more volatile when compared to debt funds. The value of your investment can fluctuate significantly in a short period. However, when it comes to the long period, they have the potential to outperform other classes. 

Debt Mutual Funds for SIP

  • Income and Stability

These are quite suitable if you prioritize stability and regular income both. This is simply because they tend to invest in fixed-income securities and provide relatively stable returns, making them suitable for short to medium-term goals. 

  • Less Risk

They have lower risk and lower volatility compared to equity funds. This is because they are less affected by what happens in the market. 

How to invest in the best performing mutual funds?

In my personal opinion, I’ve been using the Bajaj Finserv application for over four and a half months now for my financial investments. It is one of the best and smoothest apps to use to invest in such schemes.

  1. Download the application on your device. It is readily available on both the Play Store as well as the App Store
  2. Sign up with your mobile number
  3. Go to the Mutual funds under the Investment Bazaar section
  4. Proceed as per your requirement