How can I asses if mutual funds are a safe investment?

The Securities and Exchange Commission of Pakistan in exercise of the powers conferred under section 2828(3) of the Companies Ordinance, 1984 read with regulation 66A(d) of the Non-Banking Finance Companies and Notified Entities Regulations, 2008 hereby prescribes the following requirements for AMCs to classify Collective Investment Schemes (CIS) and investment plans as per the following risk profiles:

Category of CIS Plans Risk profile Risk of principal erosion
Money Market funds - AA and above rated banks and money market instruments Very low Principal at very low risk
Capital Protected Funds (non-equity), Income funds with investment in A or above rated banks, money market instruments (AA category and above) and investment in up to 6 months floating rate Govt. securities or Govt. backed sukuks, MTS. Low Principal at low risk
CPPI Strategy based fuds, Income funds (where investment is made in fixed rate instruments or below A rated banks or corporate sukuks or bonds, spread transactions, Asset Allocation and Balanced Funds with equity exposure up to 50% mandate). Medium Principal at medium risk
Equity Funds, Asset Allocation (with O - 100% Equity exposure mandate) and Balanced Funds (with 30 - 70% Equity exposure mandate), Commodity Funds, Index Trakker Funds and Sector Specific Equity related Funds. High Principal at high risk