[header] How to invest in mutual funds [title] Determine your risk tolerance. [step] There are several different types of mutual funds available, each of which has a different level of risk. Even if you are a relatively conservative investor, you still may want to add one or two higher-risk funds. 
[substeps] A diversified basket of mutual funds that meets your overall preferred level of risk allows your portfolio to experience some growth rather than merely preserving your capital. Within your overall investment account, you want to reserve at least 5 percent of your assets in cash so you can take advantage of opportunities as they arise.