Equity and debt funds are the two major types of mutual funds.
Debt funds are mutual funds that invest in bonds and other fixed income instruments, while equity funds invest in stocks.
Debt funds are divided into several subcategories depending on the types of securities they invest in.
Liquid funds, ultra-short bond funds, low duration funds, and other debt fund subcategories are some of the most frequently heard.
Debt funds, on comparison, have significantly lower volatility than equity mutual funds.
The returns, on the other hand, are smaller.
This does not imply that all debt mutual funds are safer than all equity mutual funds.
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