The only 5 mutual funds you need for 2026!

Hey there! Wish you a very happy new year! Sorry, I’m writing after a long break; but today’s newsletter is a very important one!

So I spent my entire weekend rebalancing my portfolio — Stopped all my old mutual funds and started new ones, because this year is going to be different.

And I wanted to share them with you (with the reasoning) so that you can also take an informed call for 2026.

Today’s issue might seem a bit long, but spend 7-8 minutes on it, and you won’t need to spend another minute planning your portfolio going forward :)

Let’s begin..

Okay before I delve into the funds and their reasoning, I had written about “How to choose a mutual fund” a while back. Make sure you read that, in case you haven’t already.

Here’s the link.

NOW, let’s begin :D

With all the geopolitical tensions and Trump doing what he does best, we’re going to see an unpredictable year in terms of equity. Now this means 3 things:

1. Smallcaps and midcaps will underperform for a while. Which means you should bank on large caps on stability and double down on smallcaps at good prices

2. Markets will still be volatile. So don’t depend on equity for any big planned expense you may have this year. If you want to invest for expenses that’ll come in 2026, look at investing in debt instead (more on that later)

3. Gold and silver may protect from equity shocks. Although experts are divided on this, these metals are anyway good diversifiers. So you should hold some money in these.

Don’t worry, I’ll take you through exactly which funds/assets you need in 2026.

Let’s look at the 3 points we discussed above, one by one.

1. First, smallcaps and midcaps.

   Like I said, these have corrected and will probably still underperform. So I’ve started SIPs in the following:

   1. Navi Nifty 50 Index fund: This is a pure index fund with one of the lowest expense ratios in the industry. It will give stability to my overall portfolio because it invests mainly in large cap stocks, and large caps are not as volatile as mid and small caps.

   2. Nippon India large cap fund: This is a large cap fund that has given good returns (alpha) over the large cap index. This means it should give better returns than the Navi Nifty 50 index fund (with more risk).

      These two funds are large cap funds, which won’t be as volatile as small and mid cap funds, giving your portfolio stability. 30% of my SIPs are going into these two funds.

   3. Parag Parikh flexicap fund (PPFAS): I love flexicap funds. They can be game-changers.

      Flexicap funds basically allow fund managers to invest in large, mid and smallcap companies without any restrictions in terms of proportions. So fund managers of these funds can play around with large, mid and smallcap stocks in any ratio to maximise returns. Which is why it’s no surprise that PPFAS flexicap has given 18%+ CAGR over 3, 5, 7 and 10-year time horizons. Definitely part of my portfolio!

   4. HDFC flexicap fund: Again, a flexicap fund similar to PPFAS. This fund has also given 17%+ CAGR over 3, 5, 7 and 10 years. You can choose either PPFAS or HDFC. I chose both. (PPFAS also has some international exposure, so I’d give that some preference). But the idea is, flexicap funds can give good returns if the fund manager knows how to manage them well, thanks to the flexibility they have. Flexicap is another 30% of my SIPs for this year.

   5. Bandhan small cap fund: Now, smallcaps are trading at low prices, and will probably continue do so for the year (given geopolitical tensions). So I’d get them for good prices. Even if their prices rise, I’d still like to have smallacps in my portfolio.

      I’ve chosen Bandhan smallcap fund because it takes a little more risk to generate a little more return. If you want to take lesser risk, you can look at HDFC smallcap fund or Invesco smallcap fund. My thought was that smallcap is meant to be a high-risk, high-return category, so let’s just go all-in! 😁Essentially, having a smallcap fund as a small portion of your portfolio can give you that high return you’re looking for. So keeping a small portion of your portfolio in smallcap funds could be prudent this year. I’ve allocated 10% of my SIPs to Bandhan smallcap fund.

   Basically, given the mid and smallcap correction, the above 5 funds should be an ideal selection for you

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2. Now, dealing with market volatility by investing in debt/fixed income

   Like I said, I’m not depending on equity for this year’s expenses. And you shouldn’t, either.

   Here’s what I’m doing instead — Starting bond investments.

   Basically, bonds are investment products that gives you a fixed interest every month. So you know upfront how much money you’re going to get every month when you make a bond investment (with your principal being returned after the bond matures).

   There are platforms like Grip Invest and Wint Wealth that offer bonds with up to 12.5% returns. It’ll be a bit too much to explain more about bonds, but you can reply to this email if you have questions, and I promise I’ll revert. Or you can chekc out my other newsletter ALT Decoded, where I write extensively about bonds and other alternate asset classes.

   In case you don’t want to opt for bonds directly, you can opt for bond funds that are basically mutual funds investing in bonds. Or just choose any low-risk debt mutual fund. ICICI Prudential All Seasons fund is a good fund to invest in. You can check it out for more details.

   Bonds are 10% of my SIPs for this year. I may increase that to 20% slowly, but at the moment I’m sticking to 10%.

3. Lastly, gold and silver

   Like I said, analysts are still divided about whether gold and silver will continue to give returns or not. I have a feeling profit booking will happen sooner rather than later, and prices will drop. But in any case, it’s not like they’ll come crashing down suddenly. Also, investing in them is a good way to diversify anyway, so I’m keeping 10% of my SIPs in gold and silver ETFs — 5% in ICICI Prudential Gold ETF, and 5% in ICICI Prudential Silver ETF.

   If they rise, good for me. If not, I’m still diversifying my portfolio.

1. Diversify your portfolio across large cap, flexicap and smallcap

2. Use bonds or debt mutual funds for any goals you may have this year

3. Invest in shiny metals to diversify your portfolio (and also hope for price appreciation 😉)

I’ve written this newsletter after a long time, and it takes a lot of effort to write it. It would mean a lot to me if you could let me know how you found my content. You can:

1. Reply to this email and let me know, or

2. “Like” this post on Substack and I’ll know you found it useful, or better still

3. Share this with friends or restack it on Substack

I just want to know if I should continue writing, and if enough people like it, I definitely will :)

Also, let me know if you’d want me to write on a particular topic going forward. I’d love to do so 🙂

Until next time…

Cheers,

Ankur