Understand how much risk you’re willing to take in order to reach your financial goals - understanding this is the key to choosing which type of Mutual Fund you will eventually invest in. High-risk investments have the potential to provide the highest returns but also come with the possibility that the invested capital could be lost. Medium risk investments will try their best not to lose the invested capital, but in doing so will reduce the amount of funds available to invest in growth-generating investments (which are risky by nature). Low-risk investments will expose the capital to the lowest amount of risk possible. Understanding one’s risk appetite is vital to being investing correctly and is called risk profiling.