Who should invest in which mutual funds?

Mutual funds are an excellent way of investment, especially for those who do not have the knowledge of stocks and are afraid of entering the stock market. They gather money from a pool of investors and invest in a diversified portfolio of stocks, bonds, and other asset classes.

These can be broadly classified into three main types: Equity Funds, Debt Funds, and Hybrid Funds.

The broad categories for equity mutual fund investing are large cap, Mid Cap, and Small cap. Within the equity allocation, one should invest across all these categories. The proportion in which one should invest across various categories and asset classes would vary depending on the investor's risk profile.

Mutual Fund is ideal for a wide spectrum of investors, and the choice typically depends on one’s financial goals, investment time frame, and risk appetite.

Fundamentally, equity funds are best-suited for investors seeking long-term growth, while debt funds are suited for those looking for stability and income generation.

Hybrid funds serve a combination of the two and are ideal for moderate risk-takers.

If an investor wants short-term parking of surplus cash, they may consider liquid or money market funds, as they provide easy access and low risk. Investors aiming for tax efficiency can consider exploring specific tax-saving categories. Thus, the selection depends on aligning fund type with personal objectives.