New Delhi, June 22 -- A common mistake among mutual fund investors is treating returns as the sole measure of performance. While returns determine how much wealth a fund has created, they say little about the amount of risk taken to generate those gains.

This distinction is particularly important when comparing equity mutual funds. Two schemes may belong to the same category and deliver broadly similar returns, yet one may have achieved those returns by taking significantly greater exposure to market volatility. In such cases, the fund with the higher return is not necessarily the one that delivered the better investment experience.

The comparison between JM Flexi Cap Fund and Parag Parikh Flexi Cap Fund offers a useful example. Over th...