Mutual Fund is where normal salaried people usually go as they dont have the time to insoect businesses , inspect financial statements and choose what is best for them and what is not . Therefore this responsibilty is passed to a fund manager which manages all the money for the investors including you .
There are various types of mutual funds but we will talk about 3 types of mutual funds here :
Equity simply means you get a piece of the company , a part ownershiup of the company. Therefore equity holds greater risk as well as reward . If the company does well then you get more money than others but if the company does bad or defaults then you lose all money. Therefore an equity fund manager does exactly this and sees which all companies should he invest in? The highest rate of return is in equity.
Just like we take a loan from a bank , the governments and the corporations take loan from us as well, therefore known as debt. It gives less return than equity but is far more stable and risk-free than equity mutual fund.
Mixture of debt and equity . For the ones who wants to manage both risk and wealth.
To know more check out this articleMutual fund