Mutual funds suit those individuals who are not have the knowledge and time to invest in them yet want to take erities through them to gain returns over the course. In general professionals in the domain factor in risk appetite,xposure in a mix of secu age and investment goal of the investor and inculcates discipline by following an approach that is deemed to be ideal.
When you are a fresh investor in mutual funds, fund managers usually park your money in three or four diversified schemes that are able to provide you with stable or steady returns. Such schemes are generally plain vanilla schemes which in case of market downturns do not decline in the same proportion and hence loss to the investor is greatly minimized. A decent return with a core portfolio is a major objective with which this portfolio is built. Also, core schemes should form nearly 70-90% of your total mutual funds portfolio.
In the current scenario, hybrid or balanced funds can also be chosen to form core of your mutual funds portfolio. As they are attuned to adjust to the market conditions and also do not require much maintenance. In general, the fund managers in a balanced or equity oriented hybrid funds, distribute the corpus in fixed instrument or equity based on the market conditions.
Index funds are also considered to be chosen as part of the core portfolio of your mutual funds as the return as well as composition replicates the benchmark index so the chances of fund manager going wrong with the scheme are also reduced.