Summary
The best mutual funds to invest in 2026 by AUM include Parag Parikh Flexi Cap, HDFC Flexi Cap, HDFC Balanced Advantage and HDFC Mid Cap Fund, across equity, hybrid and liquid categories.
Parag Parikh Flexi Cap has the highest AUM in the list at ₹1,48,429 crore, followed by HDFC Flexi Cap at ₹1,10,736.41 crore.
The comparison covers 3-year CAGR, 5-year CAGR, benchmarks and AUM, while each fund section also reviews costs, risk, minimum investment and portfolio.
Fund selection has to match investment goals, time horizon and risk threshold, rather than relying only on AUM or past returns.
The best mutual funds to invest in 2026 based on AUM include Parag Parikh Flexi Cap, HDFC Flexi Cap, HDFC Balanced Advantage and HDFC Mid Cap Fund. The list also includes equity, hybrid and liquid schemes, giving investors options through different risk and investment needs.
Best 10 Mutual Funds: Quick Comparison
Here is how the 10 funds compare on returns and benchmark performance:
| Fund name | Category | 3Y CAGR | 5Y CAGR | Benchmark | Benchmark 5Y return | AUM |
| Parag Parikh Flexi Cap Fund Direct-Growth | Flexi Cap | 14.69% | 13.62% | Nifty 500 TRI | 11.12% | ₹1,48,429.00 crore |
| HDFC Flexi Cap Direct Plan-Growth | Flexi Cap | 17.78% | 18.85% | Nifty 500 TRI | 11.12% | ₹1,10,736.41 crore |
| HDFC Balanced Advantage Fund Direct-Growth | Dynamic Asset Allocation | 13.76% | 15.74% | Nifty 50 Hybrid Composite Debt 50:50 Index | 8.75% | ₹1,07,765.65 crore |
| HDFC Mid Cap Fund Direct-Growth | Mid Cap | 20.39% | 20.89% | Nifty Midcap 150 TRI | 17.63% | ₹1,05,142.69 crore |
| SBI Equity Hybrid Fund Direct Plan-Growth | Aggressive Hybrid | 13.75% | 11.42% | CRISIL Hybrid 35+65 Aggressive Index | 9.98% | ₹88,560.56 crore |
| ICICI Prudential Multi Asset Fund Direct-Growth | Multi Asset Allocation | 16.28% | 17.75% | Custom multi-asset composite benchmark | 9.05% | ₹86,785.04 crore |
| SBI Liquid Fund Direct Plan-Growth | Liquid | 6.94% | 6.26% | Nifty Liquid Index | 5.17% | ₹84,054.59 crore |
| ICICI Prudential Large Cap Fund Direct-Growth | Large Cap | 13.35% | 13.22% | Nifty 100 TRI | 9.09% | ₹80,960.34 crore |
| Nippon India Small Cap Fund Direct-Growth | Small Cap | 17.62% | 20.33% | Nifty Smallcap 250 TRI | 15.63% | ₹78,956.77 crore |
| ICICI Prudential Balanced Advantage Fund Direct-Growth | Dynamic Asset Allocation | 12.97% | 11.85% | CRISIL Hybrid 50+50 Moderate Index | 8.75% | ₹74,555.42 crore |
Note: Returns are annualised using data available around 12 August 2026. The list is ranked by AUM, but a bigger fund does not automatically mean better returns or a better fit for every investor.
Top 10 Mutual Funds in India
1. Parag Parikh Flexi Cap Fund Direct-Growth
The main scheme details are listed below.
| Particular | Details |
| Category | Flexi Cap |
| AUM | ₹1,48,429 crore |
| Expense ratio | 0.68% |
| Minimum SIP | ₹1,000 |
| Minimum lump sum | ₹1,000 |
| Risk | Very High |
| Benchmark | Nifty 500 TRI |
| Fund manager | Rajeev Thakkar and team |
The scheme had delivered a five-year CAGR of 13.62%, around 2.50 percentage points above the Nifty 500 comparison return. Its three-year return was lower than several other equity funds in this list.
Its portfolio can move across market capitalisations. The fund also has scope to hold cash and overseas securities, giving the manager more room than a market-cap-specific scheme.
Cash levels were around 14% to 15% in August 2026. This can provide flexibility when valuations are less favourable, although holding more cash can also restrict participation when equity markets rise quickly.
Strength: Flexible portfolio construction across market caps, along with a long operating history.
Limitation: The strategy can go through periods of relative underperformance when its portfolio positioning differs from the larger market.
2. HDFC Flexi Cap Direct Plan-Growth
Key fund information is summarised below.
| Particular | Details |
| Category | Flexi Cap |
| AUM | ₹1,10,736.41 crore |
| Expense ratio | 0.74% |
| Minimum SIP | ₹100 |
| Minimum lump sum | ₹100 |
| Risk | Very High |
| Benchmark | Nifty 500 TRI |
| Fund manager | Amit Ganatra and Dhruv Muchhal |
HDFC Flexi Cap recorded an 18.85% five-year CAGR compared with 11.12% for the benchmark comparison. The resulting gap of 7.73 percentage points is among the wider five-year differences in this list.
The fund can invest in large, mid and small companies without maintaining a fixed allocation to each segment. Its portfolio has remained weighted towards large-cap companies while retaining exposure further down the market-cap range.
Such flexibility helps the manager alter positioning as opportunities change. It also means the portfolio can differ significantly from the Nifty 500 at different points in the market cycle.
Strength: Strong five-year benchmark-relative performance with flexibility covering market capitalisations.
Limitation: This is a ‘Very High’ risk equity fund, so it may not suit investors with a short time horizon. Sharp market moves can affect returns over shorter periods.
3. HDFC Balanced Advantage Fund Direct-Growth
The table below covers the core scheme details.
| Particular | Details |
| Category | Dynamic Asset Allocation |
| AUM | ₹1,07,765.65 crore |
| Expense ratio | 0.76% |
| Minimum SIP | ₹100 |
| Minimum lump sum | ₹100 |
| Risk | Very High |
| Benchmark | Nifty 50 Hybrid Composite Debt 50:50 Index |
| Fund manager | Srinivasan Ramamurthy, Gopal Agrawal and team |
This fund combines equity and debt rather than remaining fully invested in stocks. Its five-year CAGR was around 15.74%, while the comparison index used in the return dataset stood at 8.75%.
The fund currently holds more in equities than debt. That mix is not fixed and can shift as the manager changes exposure in response to market conditions.
That can reduce dependence on a pure-equity portfolio. However, balanced advantage funds are not automatically low-risk products, particularly when their gross equity exposure remains high.
Strength: Built-in equity and debt allocation enclosed in one scheme.
Limitation: Asset-allocation decisions can cause the fund to lag a rising equity market. Investors also need to understand the difference between gross and net equity exposure.
The fund house reports Nifty 50 Hybrid Composite Debt 50:50 Index as its benchmark.
4. HDFC Mid Cap Fund Direct-Growth
Key information on the scheme is provided below.
| Particular | Details |
| Category | Mid Cap |
| AUM | ₹1,05,142.69 crore |
| Expense ratio | 0.75% |
| Minimum SIP | ₹100 |
| Minimum lump sum | ₹100 |
| Risk | Very High |
| Benchmark | Nifty Midcap 150 TRI |
| Fund manager | Chirag Setalvad and Dhruv Muchhal |
The fund delivered a five-year CAGR of 20.89%, against 17.63% for the Nifty Midcap 150 comparison. Its three-year CAGR was also above 20% as of the comparison date.
A mid-cap scheme must keep a substantial part of its assets in mid-sized companies. HDFC states that this fund follows a predominantly mid-cap strategy with at least 65% exposure to mid-cap stocks.
That provides focused access to this part of the market. The same exposure can produce larger falls when mid-cap valuations correct or market liquidity becomes weaker.
Strength: Gives investors access to a broad mix of mid-cap companies.
Limitation: Mid-cap stocks can swing more than large caps, so this fund is better suited to a longer holding period.
5. SBI Equity Hybrid Fund Direct Plan-Growth
The scheme’s primary details are set out below.
| Particular | Details |
| Category | Aggressive Hybrid |
| AUM | ₹88,560.56 crore |
| Expense ratio | 0.71% |
| Minimum SIP | ₹500 |
| Minimum lump sum | ₹1,000 |
| Risk | Very High |
| Benchmark | CRISIL Hybrid 35+65 Aggressive Index |
| Fund manager | R. Srinivasan |
SBI Equity Hybrid Fund combines a predominantly equity portfolio with debt holdings. Its five-year CAGR was 11.42%, around 1.44 percentage points above the aggressive-allocation benchmark comparison.
The portfolio recently held roughly three-quarters of its assets in equity, with the remainder mainly in debt and cash. This creates a different return pattern from a pure-equity fund.
Debt can soften some equity-market movements. It cannot remove market risk, and the scheme continues to carry a Very High risk classification.
Strength: The fund combines equity exposure with debt in the same portfolio.
Limitation: The mixed allocation may not suit investors who want either a pure equity fund or a mainly debt-based investment.
The scheme’s official benchmark is CRISIL Hybrid 35+65 Aggressive Index. Its current AUM, Direct-plan expense ratio and minimum investment details are also available through the scheme’s current fund data.
6. ICICI Prudential Multi Asset Fund Direct-Growth
The main fund details are shown below.
| Particular | Details |
| Category | Multi Asset Allocation |
| AUM | ₹86,785.04 crore |
| Expense ratio | 0.83% |
| Minimum SIP | ₹100 |
| Minimum lump sum | ₹500 |
| Risk | Very High |
| Benchmark | Custom multi-asset composite benchmark |
| Fund manager | Sankaran Naren and team |
ICICI Prudential Multi Asset Fund recorded a five-year CAGR of around 17.75%. Its comparison index returned about 9.05%, leaving an 8.70 percentage point difference over the period.
Unlike a conventional equity fund, this scheme can spread assets across equity, debt, gold and other permitted investments. Equity still forms a large part of the portfolio.
The more extensive asset mix can curb reliance on one market segment. Returns can nevertheless trail pure-equity funds when stocks rise strongly because part of the portfolio remains invested elsewhere.
Strength: Exposure to several asset classes through one mutual fund.
Limitation: More moving parts make its performance harder to compare directly with a straightforward equity or debt fund.
The scheme currently has a Direct-plan expense ratio of 0.83%, a ₹100 minimum SIP and ₹500 initial investment.
7. SBI Liquid Fund Direct Plan-Growth
The key scheme information is given below.
| Particular | Details |
| Category | Liquid |
| AUM | ₹84,054.59 crore |
| Expense ratio | 0.20% |
| Minimum SIP | ₹500 |
| Minimum lump sum | ₹500 |
| Risk | Moderate |
| Benchmark | Nifty Liquid Index |
| Fund manager | Rajeev Radhakrishnan |
SBI Liquid Fund is very different from the other schemes on this list. Its portfolio invests in short-term debt and money-market securities rather than taking substantial equity exposure.
The fund’s five-year CAGR was around 6.26%, compared with approximately 5.17% for the liquid-fund benchmark comparison. Its return profile is therefore not directly comparable with mid-cap or small-cap funds.
Liquid funds are commonly used for short holding periods and managing surplus cash. Short maturities generally reduce interest-rate sensitivity, although credit, liquidity and reinvestment risks still remain.
Strength: Usually sees smaller price swings than equity funds and can suit short-term parking of money.
Limitation: Returns are generally lower than equity funds over strong market periods, and they are not guaranteed.
The Direct plan carries a 0.20% expense ratio, while both SIP and lump-sum investments can start at ₹500.
8. ICICI Prudential Large Cap Fund Direct-Growth
The table below summarises the important scheme details.
| Particular | Details |
| Category | Large Cap |
| AUM | ₹80,960.34 crore |
| Expense ratio | 1.00% |
| Minimum SIP | ₹100 |
| Minimum lump sum | ₹100 |
| Risk | Very High |
| Benchmark | Nifty 100 TRI |
| Fund manager | Vaibhav Dusad, Sharmila D’Silva and Sankaran Naren |
ICICI Prudential Large Cap Fund delivered a five-year CAGR of about 13.22%. This was around 4.13 percentage points above the Nifty 100 comparison return of 9.09%.
Its mandate keeps the portfolio predominantly invested in India’s larger listed companies. Banks, financial services and other large index constituents therefore tend to have a meaningful role in the portfolio.
Large-cap exposure can be relatively less volatile than mid and small caps. It is still an equity investment and can fall materially during broad market corrections.
Strength: Focus on established large-cap companies with a diversified equity portfolio.
Limitation: The strategy may lag smaller-company funds when mid and small caps lead the market.
The scheme’s fund size was around ₹80,960 crore in the latest August dataset used for this article.
9. Nippon India Small Cap Fund Direct-Growth
The fund’s main details are provided below.
| Particular | Details |
| Category | Small Cap |
| AUM | ₹78,956.77 crore |
| Expense ratio | 0.70% |
| Minimum SIP | ₹100 |
| Minimum lump sum | ₹5,000 |
| Risk | Very High |
| Benchmark | Nifty Smallcap 250 TRI |
| Fund manager | Samir Rachh |
Nippon India Small Cap posted a 20.33% five-year CAGR, while the Nifty Smallcap 250 returned 15.63% over the same period. The fund was ahead of its benchmark by 4.70 percentage points.
The portfolio remains heavily exposed to small-cap stocks. It is spread across a large number of companies, which helps avoid relying too heavily on only a few businesses.
Small companies can grow faster, but risks are also higher. Prices may fall sharply during corrections, while liquidity can become weaker than it is in large-cap shares.
Strength: Diversified access to the small-cap segment with a long performance record.
Limitation: Very High risk, potentially larger drawdowns and a greater need for a long investment horizon.
The scheme’s AUM was ₹78,956.77 crore in the August 2026 dataset, while the minimum SIP was ₹100. The fund is managed by Samir Rachh.
10. ICICI Prudential Balanced Advantage Fund Direct-Growth
The key fund information is shown below.
| Particular | Details |
| Category | Dynamic Asset Allocation |
| AUM | ₹74,555.42 crore |
| Expense ratio | 1.04% |
| Minimum SIP | ₹100 |
| Minimum lump sum | ₹500 |
| Risk | High |
| Benchmark | CRISIL Hybrid 50+50 Moderate Index |
| Fund manager | Akhil Kakkar, Sri Sharma, Manish Banthia and team |
The fund posted a five-year CAGR of about 11.85%, ahead of the comparator used in the quick table by roughly 3.10 percentage points.
Its mix of equity and debt is not fixed. The fund can change allocation over time and may also use derivatives to manage its effective equity exposure.
That flexibility can help moderate some market swings, but it can also work against the fund when markets move sharply in one direction.
Strength: The fund can adjust its equity and debt mix as market conditions change.
Limitation: Allocation calls can affect returns, so its performance may differ from a pure equity fund.
The scheme has an AUM of ₹74,555.42 crore and a 1.04% expense ratio for the Direct plan. The minimum investment is ₹500 for a lump sum and ₹100 through SIP, while its benchmark is the CRISIL Hybrid 50+50 Moderate Index.
How We Selected These Mutual Funds
The selection process used the following criteria.
- AUM: We shortlisted the 10 largest open-ended mutual fund schemes based on assets under management.
- Direct Growth plans: Returns and costs were compared using Direct Growth options wherever available, so the same plan type was used across the list.
- Different categories included: The universe was not restricted to equity. Equity, hybrid and debt schemes were allowed because the target query covers mutual funds broadly.
- Long-term performance: Three-year and five-year CAGRs were reviewed to show how each selected scheme has performed beyond a short market period.
- Benchmark comparison: Each fund was compared with a relevant benchmark or performance comparator. This helps place its return in context rather than looking at CAGR alone.
- Risk and cost: Expense ratios and risk classifications were reviewed separately under each fund. Neither was used as the primary ranking factor.
Benefits and Risks of Mutual Funds
Mutual funds can offer a few practical advantages, although the benefits vary by fund type and portfolio.
Benefits
- Diversification: A scheme can hold several securities, reducing dependence on the performance of a single investment.
- Professional management: Fund managers and research teams decide what to buy, hold or sell according to the scheme’s stated mandate.
- Choice across asset classes: Investors can choose equity, debt, hybrid or multi-asset strategies rather than using one product for every goal.
- Flexible investment methods: Most open-ended schemes permit systematic investments as well as one-time investments.
- Liquidity: Open-ended funds generally allow redemption on business days, subject to scheme rules and applicable exit loads.
Risks
- Market risk: NAVs can fall when the securities held by the scheme decline in value.
- Category risk: Small-cap, mid-cap, debt and hybrid funds react differently to market conditions. One risk label cannot describe all mutual funds.
- Credit risk: Debt funds can be affected if an issuer’s ability to repay deteriorates.
- Interest-rate risk: Changes in market interest rates can affect the prices of debt securities.
- Fund-management risk: Active funds depend partly on portfolio decisions taken by the investment team.
- Past performance risk: Previous returns show what happened historically. They do not ensure similar results in future.
Who Should Consider and Avoid Mutual Funds?
The table below shows when different mutual fund approaches may or may not fit an investor.
| Investor situation | May consider | May avoid or reconsider |
| Goal is several years away | Diversified equity or hybrid funds | Using short-term return rankings alone |
| Comfortable with large NAV movements | Mid-cap or small-cap funds | High-risk funds if losses cause early exits |
| Wants equity with some debt allocation | Aggressive hybrid or balanced advantage funds | Assuming hybrid automatically means low risk |
| Has money needed in the near term | Liquid or suitable short-duration debt options | Equity funds for immediate spending needs |
| Wants exposure across asset classes | Multi-asset funds | Expecting them to behave like pure equity funds |
| Needs a simple core equity allocation | Large cap or flexi cap | Concentrated categories without understanding the mandate |
Mutual funds can suit both new and experienced investors, but the category matters more than the label “best”. A scheme suitable for a ten-year equity goal may be unsuitable for money needed six months later.
Investors who cannot tolerate a temporary fall in portfolio value should be particularly careful with equity-oriented funds. Small and mid-cap schemes need even greater tolerance for fluctuations.
How to Choose a Mutual Fund
A shortlist is only a starting point. Review these factors before selecting a scheme:
- Investment goal: Decide what the money is for and when it will be required. This determines which fund categories are worth considering.
- Time horizon: Equity generally needs a longer horizon. Short-term requirements call for products where capital volatility is lower.
- Returns: Compare three-year, five-year and longer periods where available instead of choosing a scheme from one recent return number.
- Benchmark: Check whether the fund has added value relative to the index appropriate for its mandate.
- Risk: Review the Riskometer along with portfolio composition. Funds carrying the same risk label can still take different core risks.
- Expense ratio: Costs are deducted from scheme assets. Compare expense ratios between similar funds rather than across unrelated categories.
- Portfolio: Look at market-cap allocation, major sectors, asset classes and concentration in individual holdings.
- Fund manager: Check the manager’s tenure and whether significant changes have occurred in the investment team.
- Consistency: A fund does not need to top its category every year. More relevant is how its strategy has behaved over different market periods.
Do not choose a mutual fund only because its AUM is high. Fund size tells you how much money the scheme manages, while suitability depends on what the scheme owns and why you are investing.
SIP vs Lump Sum for Mutual Funds
The table below compares the two common ways of investing in mutual funds.
| Criteria | SIP | Lump sum |
| Investment method | Fixed amount invested periodically | Larger amount invested at one time |
| Market entry | Spread across several dates | Entire investment enters at one market level |
| Cost averaging | Can benefit from buying at different NAVs | No automatic averaging after investment |
| Cash-flow suitability | Useful for regular income | Useful when surplus capital is available |
| Discipline | Encourages regular investing | Requires a separate decision for each investment |
| Market risk | Does not remove market risk | More exposed to the entry level initially |
A SIP can work well when money becomes available every month. Regular investing also removes the need to decide a fresh entry date for each payment.
Lump-sum investing may suit investors who already have capital available. The better method depends on cash flow, risk tolerance and the type of fund rather than on one approach always producing higher returns.
Direct vs Regular Mutual Funds
The table below explains the main difference between Direct and Regular plans.
| Criteria | Direct plan | Regular plan |
| How it is purchased | Directly without a distributor | Through a distributor or intermediary |
| Expense ratio | Generally lower | Generally higher |
| Portfolio | Same underlying scheme portfolio | Same underlying scheme portfolio |
| NAV | Usually higher over time if costs are lower | Can be lower because of higher ongoing costs |
| Guidance | Investor chooses independently | Distributor may provide assistance |
| Suitable for | Investors comfortable making their own fund choices | Investors who want distribution support |
Direct and Regular plans invest in the same underlying scheme. The main difference is the cost structure and distribution route.
SEBI explains that Direct plans do not involve distributor commissions and therefore generally have a lower expense ratio than Regular plans. The lower cost can create a difference in returns over longer periods even when the underlying portfolio is the same.
This article uses Direct Growth plans for scheme-level comparisons wherever applicable.
Taxation of Mutual Funds
Tax depends first on what kind of fund you own. The holding period matters too, but the rules are quite different for equity and debt schemes.
- Equity-oriented mutual funds: If you redeem within 12 months, the gain is treated as short-term and taxed at 20%, subject to the applicable STT conditions. After 12 months, the gain becomes long-term. In that case, eligible gains above ₹1.25 lakh in a financial year are taxed at 12.5%.
- Specified debt-oriented mutual funds: If a specified debt-oriented mutual fund was bought on or after 1 April 2023, keeping it for three or five years does not unlock a separate long-term tax rate. The gain is taxed at the investor’s applicable income tax rate.
- Other non-equity mutual funds: Tax treatment is contingent on factors such as whether the units are listed and how long they have been held. Where the gain qualifies as long-term, the rate is generally 12.5%, subject to the applicable tax rules.
FAQs
Among equity mutual funds, the top five by one-year return as of early August 2026 were TRUSTMF Small Cap, Old Bridge Focused, LIC MF Value, Motilal Oswal Small Cap and Bank of India Small Cap. Returns ranged from about 20.66% to 28.16%.
Mutual funds can be considered at any market level when the scheme matches your goal, investment horizon plus risk tolerance. For long-term goals, regular investing can also reduce the need to time market entry.
There is no single best-performing mutual fund across all periods. Performance changes with the return period and fund category, so investors should compare long-term returns, risk, benchmark performance, costs and portfolio quality.
Start with your goal and how long you plan to stay invested. Then compare funds in the same category on long-term returns, benchmark performance, risk, costs, portfolio and fund-manager track record.
Mutual funds may suit investors who want professionally managed exposure to equity, debt or multiple asset classes. The appropriate category depends on how much risk the investor can accept and when the money will be needed.
Among equity mutual funds reviewed by ET in August 2026, TRUSTMF Small Cap Fund had the highest one-year return at about 28.16%. Short-term performance alone should not determine fund selection.
No. Mutual fund returns are market-linked and the level of risk varies by scheme. SEBI’s Riskometer classifies schemes from low to very high risk, helping investors understand the risk before investing.
The right time depends more on your goal and investment horizon than on short-term financial movements. Long-term investors can consider investing regularly, while money needed soon should generally avoid high-volatility equity categories.
It depends on the goal. Mutual funds offer market-linked returns and carry investment risk, while FDs pay a fixed interest rate. Eligible bank deposits are also insured by DICGC up to ₹5 lakh per depositor per bank.
