The fund manager of equity mutual funds primarily invests in equity-oriented instruments of different companies. On the other hand, debt mutual funds invest in fixed-income securities such as debentures, bonds, and money market instruments.

These funds invest 65% of their funds in companies that have the potential to distribute dividends to their shareholders regularly. These funds are also known as ‘dividend yield mutual funds.’

Ideally, holding equity mutual funds , for the long term is better. . Not only is the tax rate low, but you can also claim an exemption on LTCG returns under Rs 1 lakh. You can choose the holding period depending on your financial goals.