How I pick my Mutual Fund investments | Best list for 2026

ELI5/TLDR

A stock-picking YouTuber explains why most retail investors should keep the bulk of their money in mutual funds rather than picking stocks themselves — not because mutual funds are smarter, but because they hide the day-to-day price swings that make people panic-sell at the bottom. He then walks through how he judges a fund (does the manager actually bet differently from the index, or just hug it?), names a handful of funds he thinks are doing the job well, and lays out the price levels at which the broad Indian market and a few sectors would start looking cheap again. The recurring message: think of yourself as a “unit collector,” keep buying steadily through the ugly years, and reset your return expectations down to a realistic 12-13% a year.

The Full Story

Why mutual funds beat DIY for most people

The video opens with a distinction the host keeps returning to. Doing your own stock picking fails most retail investors for two reasons, and neither is about intelligence.

The first is emotional. When you hold individual stocks, you stare at the one that’s down and forget the portfolio as a whole. Mutual funds quietly fix this — you watch the fund’s net asset value (NAV, basically the per-unit price), which moves slowly and smoothly compared to individual stocks. Less visible volatility means fewer panic decisions.

“Portfolio level returns par bahut kam log anchor hote hai” — almost nobody anchors to their total portfolio return; they anchor to the losing position.

The second is structural. Fund managers operate inside guardrails: defined benchmarks, caps on how much can go into one stock or sector, forced diversification, and a long-term mandate. An amateur who dumps 100% into, say, the solar sector and watches it de-rate has no such brake.

His practical rule: a first-time active investor should keep the majority of money in mutual funds and trade individual stocks with only 5-20% of capital, raising that slice only if, every two to three years, your own picks genuinely beat the funds.

The “unit collector” mindset

This is the conceptual heart of the video. Think of an SIP (a fixed monthly auto-investment) not as “buying returns” but as collecting units. If you put in ₹10,000 a month and the NAV is ₹100, you get 100 units. If the NAV falls to ₹90, the same ₹10,000 buys more units. So a falling market is when you accumulate the most — which runs against human instinct, which screams “stop.”

“Giri hui market mein bhi aap khareedte jaayenge systematically, which is against human nature.”

He illustrates with long-run numbers: a fund like PPFAS Flexi Cap has had wildly uneven years — roughly +50%, then -2%, a ~-22% COVID crash, a +60% recovery, flat years — yet someone who simply kept SIPing through all of it compounded at north of 20% annually. The catch is that you have to judge SIP performance over rolling five-to-seven-year windows, not the last two years, because the last two years can easily be flat or negative right when the accumulation is most valuable.

What “nature of returns” actually looks like

To recalibrate expectations, he shows the monthly and yearly return data for Indian indices. Two takeaways:

Even in a normal year, the Nifty 50 has four to five negative months. Volatility is the default, not the exception. Whenever the Nifty falls more than 3-4% in a month, he treats it as a cue to increase the SIP.
Small caps are brutally cyclical. The Nifty Smallcap 250 has done +70%, +10%, ~0%, +60% in good runs — but those are followed by years of -27%, -18%. “What goes up also comes down. This is reverse to the mean, and in finance reversion to the mean is always true.”

His read on the current moment (late 2025): the small-cap index has already had roughly 15 months of correction/consolidation and may need another two to nine months. But — and this is his optimistic note — the seeds of the next bull market are always sown in the bear market. He lists the macro tailwinds he’s watching: rate cuts, GST cuts, income-tax relief, the PLI manufacturing push, a possible India-US trade deal, currency stabilization, and very low foreign-investor holdings. Economics has a lag, so these reverse slowly, then all at once.

“Bull market mein tikta wahi hai jisko defence bhi karna aata hai” — surviving a bull market is about knowing how to defend in the down phases, not give all your gains back.

His framework for picking a fund

He’s upfront that this is qualitative — he doesn’t put much weight on Sharpe ratios, betas, Sortino ratios. He’d rather read the portfolio and figure out what the manager is thinking. Four things he looks at:

Conviction shows up in position sizing. A fund that’s just “guiding” — hugging the index — won’t outperform, because the manager is managing career risk, not taking real bets. He wants funds that sit meaningfully away from the index.
The manager’s philosophy. Read their material, watch their interviews, get into their head.
AUM (size) vs. mandate. A ₹1 lakh crore small-cap fund is a problem — it can’t deploy that much into genuinely small companies, so it ends up holding 50-60 stocks and effectively buying the market. Size is an enemy in small caps.
Experience across cycles, and the timing of fund launches. When a manager launches a fund — e.g., a financials fund right as the financial sector turns — it signals they understand cycles. (He’s careful to say he’s commenting on philosophy and timing, not promising performance.)

The actual fund picks

Flexi Cap (manager free to roam across large/mid/small):

PPFAS Flexi Cap — his long-time favorite. Now huge (~₹1.25 lakh crore AUM), sitting on ~25% cash, which is dry powder for crashes. Low portfolio turnover (~39% vs. category 100-150%), genuine value discipline, foreign holdings like Google/Amazon (grandfathered from before the rules changed), insiders invested alongside. Only real drawback: size now makes it hard to move in small companies.
HDFC Flexi Cap — slightly better five-year record, heavy financials tilt (~57% in financial services), valuation discipline maintained. Stands to benefit if financials outperform in FY27.
Helios Flexi Cap — newer, smaller (~₹5,000 crore), so more nimble. Holds “new-age” names (Zomato, Adani Ports, defence like Bharat Electronics) plus smaller wealth-management and recycling plays. More diversified, higher valuation profile.

Small Cap:

A small-cap fund he covered last year that has beaten the Nifty Smallcap 250 by a meaningful margin over multiple horizons, with low turnover and valuation discipline (sized into South Indian Bank, Bangalore-area realty plays at the right time). His repeated caveat: small-cap funds must hold many stocks not by choice but by compulsion — even a 1-2% position in a ₹17,000 crore fund is ₹170+ crore, too big for truly small companies. Patience is the price of admission; the 2017-2020 sideways period tested almost everyone.

Mid Cap:

Invesco India Midcap Fund — the one he says quietly beat his own portfolio, which is why he started tracking it. ~₹9,000 crore (manageable size), strong one/two/five-year outperformance, turnover ~33% (three-year average holding period), ~49 stocks with top-10 at ~44% (real conviction). Holds AU Small Finance Bank as a top position — a bet on its potential conversion to a universal bank.

Passive side: the Nifty ranking meter and sectors

He shares his Nifty 50 P/E ranking meter (which he also tweets):

16-18x = “bad house” / cheap; 18-19x = cheap; 19-20x and 20-21x = below average — these are the lucrative zones for lump sums.
22-23x = average; 23-25x = expensive; 25x+ = very expensive — historically little reward buying here, because you don’t get the benefit of P/E re-rating.

Today the Nifty trades around 22.8x (slightly above average). Doing the math on FY26 EPS (~₹1,146) and assuming ~4% growth, he gets levels: the Nifty would look genuinely attractive for a lump sum somewhere around 23,000-24,500 (roughly 20-21x forward), assuming a ~7% dip from current ~26,100.

Sectors and thematic indices he finds interesting:

Nifty Microcap 250 — at ~27x now; would get interesting if it falls to ~20-22x, with support around 19,500-20,000. Holds the fastest-EPS-growing companies.
Nifty 200 Momentum 30 — momentum factor has been correcting for a year; worth watching for when broad markets turn.
PSU Bank / Nifty Bank — trading near average price-to-book, NPAs largely controlled, forward earnings upgraded because rate cuts speed up loan growth. FY27 could be the year for banks.
Nifty IT — coming out of a five-year-low valuation, ~28x, base forming on the charts; “less to lose here right now because there’s a lot of pessimism.”
Gold lenders / gold — a “double steroid” play: gold rising and the rupee depreciating against the dollar. He prefers playing it via gold-loan companies and commodity exchanges rather than holding gold directly.

He closes by reminding viewers this is a passive-investor framework, not stock tips, and that any of these funds could miss the list — it’s a checklist, not a guarantee.

Key Takeaways

Keep the majority of capital in mutual funds; trade individual stocks with only 5-20%, scaling up only if your picks beat the funds over 2-3 year windows.
An SIP’s real benefit is collecting more units when the NAV falls — so falling markets are accumulation, not catastrophe. Judge SIP results over 5-7 year rolling periods, not the last two.
A normal year contains 4-5 negative months for the Nifty; treat any monthly drop over 3-4% as a cue to add.
Small caps are extreme mean-reverters (+60-70% years followed by -20%+ years); they demand patience most people don’t have.
Judge a fund qualitatively: does its position sizing show conviction, or does it just hug the index? Index-huggers can’t outperform because managers are protecting career risk.
Large AUM is a structural handicap, especially in small caps — even a small percentage position becomes too big for genuinely small companies, forcing over-diversification.
Funds named as standing out: PPFAS Flexi Cap (cash-rich, value-disciplined), HDFC Flexi Cap (financials-heavy), Helios Flexi Cap (nimble, new-age tilt), Invesco India Midcap.
The Nifty 50 P/E “ranking meter”: below ~21x is the lucrative zone for lump sums; above ~25x historically pays little. Today it’s ~22.8x; attractive lump-sum levels are ~23,000-24,500.
Sectors flagged as interesting on valuation/cycle: PSU & private banks (FY27 setup), Nifty IT (max pessimism, base forming), gold lenders (gold up + rupee down).
Reset return expectations to ~12-13% annually given slower nominal GDP growth — post-COVID expectations of 30-40% CAGR are unrealistic.

Claude’s Take

This is a competent, honest version of a genre that’s usually pure clickbait. The title promises a “best list for 2026,” but the host spends most of the runtime on mindset and framework, and explicitly refuses to call these recommendations. That’s to his credit. The “unit collector” framing and the insistence on rolling 5-7 year windows are genuinely useful correctives to how retail investors actually behave.

The substance is solid where it’s qualitative. The Nifty P/E ranking meter is a reasonable mental model — buy cheaper, expect less when expensive — and his point about AUM being a structural enemy in small caps is correct and underappreciated. The macro tailwind list (rate cuts, GST, PLI, trade deal) is the standard 2025 India-bull narrative; nothing wrong with it, but it’s consensus, and he presents it with more confidence than the lag-heavy, contingent reality deserves.

Two BS-filter flags. First, the fund list leans on funds he’s “been discussing for years” — there’s mild survivorship and confirmation bias baked in; the funds that looked good in hindsight are the ones that make the checklist. Second, the precise Nifty levels (23,000-24,500) are built on a chain of EPS-growth assumptions that could easily be off by a year; treat them as zones, not triggers. He mostly says as much, but the false precision is seductive.

Score of 6: clear thinking, useful frameworks, intellectually honest about uncertainty — but it’s consensus India-bull positioning, the transcript is rough, and there’s no new analytical edge here beyond well-packaged investing common sense. Good for someone building first principles; thin for anyone past the basics. Note: there’s a paid-course sales pitch wedged in the middle, which is worth knowing the incentives behind.