What is the difference between equity, debt, and hybrid mutual funds?

What is the difference between equity, debt, and hybrid mutual funds?

1- Allocation
Hybrid Funds : Invests in a mix of equity and fixed-income instruments.
Equity Funds: Primarily invests in stocks and other equity-related instruments.
Debt Funds : Invests in money market instruments, commercial papers, corporate securities, government bonds, etc. 

2- Return on Investment
Hybrid Funds : Returns depend on the performance of underlying securities.
Equity Funds : Returns are subject to market-related risks.
Debt Funds : Returns are influenced by interest rate and credit risks. 

3-Risk Profile
Hybrid Funds : Risk level varies from low to very high based on asset allocation.
Equity Funds :Carries a high-risk profile.
Debt Funds :Ranges from low to moderately high risk. 

4- Liquidity
Hybrid Funds : Liquidity depends on whether it is an equity- or debt-oriented hybrid fund.
Equity Funds : Highly liquid (except ELSS).
Debt Funds : Short-term debt funds offer high liquidity, while long-term debt funds have lower liquidity. 

5- Investment Horizon
Hybrid Funds : Suitable for investors with a 3–5 year horizon.
Equity Funds : Ideal for long-term investors (5+ years).
Debt Funds : Often used for short-term investments but can also be held long-term. 

6- Tax Benefits
Hybrid Funds : No tax benefits.
Equity Funds : ELSS funds offer tax benefits under Section 80C, allowing deductions up to ₹1.5 lakh per fiscal year.
Debt Funds : No tax exemptions.


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