Which is the better alternative for financial freedom: Equity Fund or Debt Fund?

Which is the better alternative for financial freedom:  Equity Fund or Debt Fund?

There are many factors to consider before deciding what category of mutual investment you will invest in:

Public Debts Debts vs Equity Mutual Funds: Aim to save money to meet our financial goals in life. Savings translate into investments when you set a specific goal for a higher return. The stage in your life when you have accumulated enough savings or goods that can help you to cover your living expenses without having to rely on any ordinary money is what is called financial freedom. Needless to say, your health goals such as children’s education, marriage, home shopping will have to be met before you reach that stage. To achieve your long-term goals, the role of two prominent asset classes - equity and debt. It is the combination and good use of both of these assets that will help you to gain financial freedom in life. There are several other aspects of financial freedom, however; here we touch on its investment component. Also, most of us, especially the young ones, can do this by using equity funds and credit cards. However, if you start by asking which is the best credit card or wallet, this start will not be the right one. Both, debt and equity funds have different roles to play. “As an ordinary investor, one person needs to understand his or her purpose. If the goal is high returns and the investor is willing to take a big risk equally then the idea is to save big money and debt is the way to go. It depends on the personal purpose and age of the individual. I would recommend reducing the age, in which case the risk should be there because over time, the funds will exceed the refund according to all estate classes and when the age is as high as 50 or so debt should be an option because, at that time, we should not waste our hard-earned money. ”said Rachit Chawla, CEO, and Founder, Finway FSC.

Fund schemes that invest at least 65 percent of investor's shares in equity mutual funds are called Equity mutual funds. Returns from such investments are equal as their underlying assets fluctuate naturally and are therefore suitable for long-term investment. Debt funds invest in fixed income instruments such as government security or corporate bonds. In addition to any income information, they also earn interest on the fixed investment securities in which they are invested. Equity funds operate well in the long run while loan funds are in line with medium-term objectives. Your risk factor also needs to be considered but appropriately if you are young, choose equity funds. Retirees and older people also need exposure to finance to address inflation but less exposure to young people will suffice. There are many factors to consider before deciding what kind of investment you should invest in.

According to Colonel, Sanjeev Govila (Retd), SEBI Registered Investment Advisor (RIA), and CEO, Hum Fauji Initiatives, a financial planning company, the following should be the main criteria and how they should be considered:

1. Your risk profile - how much compensation instability is acceptable.

2. Future Financial Needs (Terms) - For long-term goals, usually 5 years or more, equity is the best bet while for short-term purposes, credit should be considered.

3. Current market conditions - general market and stock-specific measurements, as well as interest rate status, are important.

“Generally speaking, the combination of the above three will determine which combination of debt equality is best for one person. And in deciding so, one has to take the portfolio approach rather than this - or that approach. Generally, all portfolios will have Equity, Debt, and hybrid funds in a variety of ways,” added Col. Govila (Retd). Once you are close to the goals, it is best to move the risk from stocks to fixed-rate debt funds. You can start from equity investments to financial debt for about three years away from savings purposes. While investing in a mutual fund is less risky than investing in a direct financial market, it is not a risk. Therefore, do not overdo it when choosing a mutual fund plan, especially if you are looking for a long term.