Mutual funds suit all classes of investors. You may choose a fund depending how much risk you are willing to take and when you want the money back. Go for an equity fund if you don't mind a little higher risk.
If you are slightly risk-averse, prefer a balanced fund, which invests in stocks only up to 60-70%. If you are largely risk-averse, stick to debt funds. Have very little appetite for risks? Choose liquid funds like Cash Funds or short term floating rate funds.
You may also choose funds depending on when you want your funds back. Look at a cash fund if you need the money in a few weeks. A short-term bond fund would just be fine for you if you expect a return in 3 to 6 months.
An income fund or an equity fund would fit in if you can afford to leave it with the fund manager for over a year. Even within each category, you can pick and choose. In equity funds, for example, you have a variety of options: blue chip funds, mid-cap funds, contrarian funds, opportunity funds, dividend yield funds, sectoral funds that invest specifically in select business segments etc. Equity-linked savings schemes allow you to reap tax gains up to Rs 1 lakh (Rs 100,000) a year.
You may want to invest but may not have a large corpus right now. Do not worry. Save a little every month. Many equity funds offer the option of systematic investment plan (SIP) that permits you to invest a certain sum every month or every quarter. This way, you not only discipline your investments but to a great extent can protect yourself against the vagaries of the market.
Debt funds do not lack luster either. Choose among medium term debt funds, short-term bond funds, floating rate funds, dynamic bond funds and cash funds. If you want an aggressive debt fund, then go for gilt funds. If you prefer a mix of both equity and debt, MIPs or balanced funds would do just fine.
The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.