Important tips for investing in mutual funds

New Delhi: If you are keen on investing in mutual funds and are looking at a long term horizon without a lock-in period then here are a few golden tips for choosing mutual funds that are likely to give you much better returns than any other investment option:

If you are not looking for a mix of an investment option with a tax saving instrument in mutual fund, then debt or equity funds are two options.

While debt funds are generally safe, the risk factor of equity funds varies. 

Even among equity funds, balanced funds which combine both debt and equity are least risky, while mid- and small-cap ones are the riskiest.

One should note that large-cap funds invest in large companies and tend to give moderate returns at a low risk. 

If you have a high risk potential then there are diversified equity funds which invest in companies of all sizes and have exposure to companies of all sizes. 

Also, invest in mutual funds not in just one sector but have exposure to different sectors.

Also, if you are looking at les than five year duration, you can look for debt fund investment, while if your goal is several years away, say 7-10 years, you must invest in equity funds.