With your objectives in mind, determine how much risk you're prepared to take. Do you want to adopt a conservative, moderate or aggressive investment strategy? Ask yourself the following questions before you make your decision:

• Are you prepared to make long-term investments, which will allow you to take greater risks for higher returns ?
• If you're going for short-term, high-risk investments, can you afford to lose some of the money you invest ?
• If you're married with children, what level of risk can you take and still be certain of their future ?
• You're going to diversify by spreading your investments over a range of low- to high-risk products. But will you weigh them towards high- or low-risk investments ?
• If you want your money to be safe, will you be content with a moderate rate of return ?
• If you opt for safe investments, will the returns be enough to cover inflation ?

Inflation - As we all know money starts to lose its value as time goes by. This is due to a phenomenon called inflation which is a measure of the rate at which prices of goods and services increase. When positive, inflation indicates that money is losing its value. Simply put, the money you earn today will be worth less 10 years from now.

Interest rate fluctuations - A drop in interest rates means a smaller return on your deposits, and if the interest rate is lower than the rate of inflation, your savings lose value. But for some investments, such as equities and bonds, the value of your investment may rise because of the drop in interest rates.

International economic trends - What happens in other economies can affect the value of your money. Political circumstances, GDP growth, and stock-market indices in other countries can all have an impact on the buying power of your money.

With so many factors involved, it is crucial that you have a financial plan to protect your future and to put your money where it generates reasonable returns to meet your needs.

Mutual fund schemes may be classified on the basis of their structure and their investment objective

By Structure- there are two types

Open-ended Funds -An Open-ended Fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices.

Close-ended Funds -A Close-ended Fund has a stipulated maturity period, which generally ranges from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the Stock Exchanges, if they are listed. The market price at the stock exchange could vary from the scheme's NAV on account of demand and supply situation, unit holders' expectations and other market factors.