A mutual fund is an investment product. You have mutual funds that invest in stocks (equity funds), bonds or debt instruments (debt funds) and in both debt and equity (hybrid funds). Equity funds are high-risk, high-return funds. They can fall sharply, but can also deliver strong returns. Debt funds are lower risk, though funds can see swings in returns based on their strategy. Some debt fund categories specifically invest in very short-term, high-quality instruments where the risk is low. Hybrid funds rank in between equity and debt funds in terms of risk and return.
However, you cannot get into mutual funds expecting zero risk or zero chances of losses. A better understanding of what types of funds there are will help you know whether or not they are suitable for you.
Based on this, you can take a decision on where to invest.
Srikanth Meenakshi is foun-ding partner, PrimeInvestor.