Debt funds are suitable for investors who look for safe investment and look for a huge amount at the end of the investment period. Debt fund investors receive rate of interest for their investment. Even though debt funds are safe investments, their rate of interest could slightly be volatile based on the market conditions.
Equity funds generally gain returns with the increase in market value of the stocks. When the company performs well the market demand increases and buyer tend to pay more than the current price of the stock.
Debt funds gain returns based on the rate of interest. These rates of interest are fixed and regular. Irrespective of the borrower’s performance the rate of return remains constant. The demand for debt fund increases when a bond is nearing to its maturity.
In private entities, there is an option called as convertible debentures where the investor can convert his investments to equity. Other than that, there are no options for the investor to gain advantage over companies’ capital.