Understand the category before choosing a scheme.

A Mutual Fund pools money from investors and invests according to the scheme's stated objective. Different categories carry different types and levels of risk, so the starting point should be the goal and time horizon—not a recent return number.

What to consider

Major categories

Equity Funds

Invest mainly in shares and can experience significant short-term fluctuations.

Debt Funds

Invest in fixed-income securities and can have interest-rate, credit and liquidity risks.

Hybrid Funds

Combine asset classes; the mix and risk depend on the scheme.

Common mistakes

• Choosing only because of recent performance or ratings.
• Using a volatile investment for money needed soon.
• Holding multiple funds without checking overlap.
• Assuming SIP removes market risk.