Mutual funds are invested in equity, debt, gold, and combination of these asset classes. This diversification in investment helps the fund to perform well because when equity doesn’t perform gold perform while investment in debt gives a fixed level of income. However, in the case of Bonds and Non-Convertible Bonds (NCDs), the risk is related only to a specific company which makes it a high-risk option. This is the reason why NCDs and Bonds have a higher rate of return, as risk and return are directly proportional, higher the risk and higher is the return.
One can choose the Mutual funds that suit to their risk appetite and other factors. Also, with SIP options in Mutuals funds, one can create wealth in a longer-run, which cannot be attained by Fixed income products like bonds and NCDs. So investing in Mutual funds is comparatively much wiser that investing NCDs and Bonds. And if you invest in NCDs and Bonds, then ensure that you check the Credit rating given to the company by ICRA, Crisil, CARE, etc.