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Balanced funds are a suitable option for first-time investors. They invest around 70% of your money in equity and the rest in debt. The great advantage of balanced funds is that they are safer than pure equity funds. They do well when stock markets rise but fall less sharply when the markets go down. As a result, you benefit from the return potential of stocks with a lower downside as compared to a pure equity fund. This makes them well-suited for those who are not accustomed to the volatility of equity markets.

Multi-cap funds are ideal for those who do not have sufficient knowledge of equity investing or the time to track stock markets. These funds have liberal investment mandates and therefore, their fund managers have the flexibility to invest your money in stocks of any sector, size or theme. Therefore, you do not have to decide which sectors to invest in or take a call on whether mid-caps will perform better or large-caps, and so on. As a result, you can be completely hands-off, leaving all those decisions to your fund managers.

Large cap funds are the safest among pure equity funds. They invest in stocks of big companies which tend to have stable businesses. These funds mirror the performance of the economy and are geared to handle market cycles better. Unlike mid- and small-cap stocks that may not last through a long down market cycle, large-caps have the size and scale to weather the bad market phase.

Equity-linked savings schemes (ELSS), or tax-planning funds, are suitable for those looking to save taxes under Section 80C of the Income Tax Act. You can think of them as tax-saving clones of multi-cap funds, except that they can be a bit more aggressive in their approach. That is because they have a 3-year lock-in period which provides some head room to the fund manager to take longer-term calls or invest in relatively less liquid stocks.

Liquid funds allow you to earn extra returns on your idle money than savings bank accounts. These funds invest in debt securities of very short duration and therefore, are almost risk-free. Besides, they offer high degree of liquidity as the money is ordinarily credited to your bank account within 1 business day from the date of redemption. This combination of a high degree of safety, liquidity and extra returns make liquid funds a ideal choice for your idle money.

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