Mutual funds are a pool of capital collected from different investors for a common purpose. These can be capital appreciation, stable income generation, or a combination of both. Broadly, they are classified into equity funds, debt funds, and hybrid funds. ​Equity funds invest in stocks of companies with different market capitalizations. They aim to appreciate the invested capital over time. However, they come with elevated risks for the investors. ​Debt funds, on the other hand, invest in instruments such as low-risk instruments such as bonds, debentures, and money-market instruments. ​Hybrid funds invest in a combination of equity and debt instruments to help investors benefit from capital appreciation and income generation.