The first step is to define your investment goal. The questions that you should ask yourself are: What are your return expectations? How much risk am I willing to take with this investment? What is my time horizon? What is the purpose of this investment? These are some of the questions that will help you define your investment goal. Eg: I want to plan and save for my retirement which is 30 years away and I am willing to take a higher risk in order to receive higher returns or I want to save for a surgery that my father needs after two years and I am willing to take very low risk as I cannot afford to lose this money. And there are many reasons to save and invest and everything will vary from person to person. So as an individual, you will have to define your investment goal and your investment goal will guide you in making your investment decisions. 

Defining your return & risk expectations will help you decide your investment mix between fixed deposits (FD), mutual funds(MF), exchange-traded funds (ETF), and direct equity ownership. Generally speaking, Fixed deposits have the lowest risk and the lowest returns out of the four and so on.

Defining your time horizon will help you decide the amount of risk you can take. Generally speaking, a longer time horizon should allow you to take higher risks and in turn receive higher returns and vice versa. 

The purpose of your investment should also factor into the amount of risk you are willing to take. If the money is needed for a life-threatening surgery after two years, naturally you should be investing such money in a very low-risk instrument. 

What we have described here is just a starting point, there are hundreds of books written on each of these topics separately that can give you a more in-depth understanding. It is always a good idea to consult with your financial advisor for your investment decisions.

Below is a nice graphic version of the above information.