Investing in mutual funds can be confusing. There are so many categories to choose from.
Apart from the two basic categories of equity and debt, there are many others like hybrid, international, gold, etc.
So which fund is the best for you?
First, you need to answer a very important question. Are you looking for growth or safety? Equity is for growth and debt is for safety.
But please keep in mind that debt mutual funds cannot guarantee safety and equity mutual funds cannot guarantee returns.
Next ask yourself if you are willing to be a long term investor, i.e. do you have a horizon of at least 5 years or more?
If yes, then equity mutual funds are the way to go. Only invest as much money in equity funds that you don't need for at least the next five years.
Otherwise it's best to stick to debt mutual funds and fixed deposits.
Within equity funds choose largecap funds if your goal is growth along with stability.
If you're fine with volatility in your portfolio, you can consider midcap and smallcap funds. But it's always a good idea to invest a majority of your portfolio in largecap funds for a stable portfolio.
If you don't like the idea of marketcap-based investing and prefer to trust a fund manager to invest your money across the entire market, then consider multi-cap funds. But keep in mind these funds are riskier than largecap funds.
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