Every month, I speak with NRIs in Dubai who tell me they have been "saving" for 15 years. Their money sits in bank accounts. Fixed deposits. Maybe some gold.
And yet, they feel financially stuck.
Here is the uncomfortable truth. If you invested AED 1,000 monthly in a bank savings account earning 2% since 2010, you would have approximately AED 2.3 lakh today. The same amount in a well-chosen equity mutual fund earning 15% would have grown to AED 5.8 lakh.
The difference is not luck. It is understanding how wealth creation actually works.
At Belong, we have spent years helping NRIs navigate Indian investments. This guide shares everything we have learned about choosing the right mutual funds for serious, long-term wealth building.
What Makes a Mutual Fund Good for Wealth Creation?
Before comparing fund names, understand what separates wealth creators from wealth destroyers.
Consistent Long-Term Returns: A fund that delivers 25% one year and loses 20% the next is less valuable than one delivering steady 18% returns. Check 5-year and 10-year CAGRs (Compound Annual Growth Rates), not just recent performance.
Professional Fund Management: The fund manager matters. Look for managers with 10+ years of experience who have navigated multiple market cycles.
Reasonable Expense Ratio: Every percentage point in fees is money not compounding for you. Direct plans have lower expense ratios than regular plans.
AUM That Makes Sense: Too small (under ₹500 crore) and the fund may struggle with liquidity. Too large (over ₹50,000 crore in small-cap) and the fund may struggle to deploy capital effectively.
👉 Tip: Use Belong's Mutual Funds Explorer to compare funds across these parameters.
Top Mutual Funds for Wealth Creation by Category
Wealth creation is not one-size-fits-all. Your fund selection should match your risk tolerance, investment horizon, and financial goals. Here are the best performers in each category as of December 2025.
Small-Cap Funds: Highest Growth, Highest Risk
Small-cap funds invest in companies ranked 251st and below by market capitalisation. These are emerging businesses with explosive growth potential but significant volatility.
Best For: Investors with 7-10+ year horizons who can stomach 30-40% drawdowns.
Fund Name | 5Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|
Quant Small Cap Fund | 30.78% | 22,832 | 0.68% |
Nippon India Small Cap Fund | 27.32% | 68,572 | 1.39% |
HDFC Small Cap Fund | 26.09% | 10,179 | 0.90% |
SBI Small Cap Fund | 26.00% | 5,052 | 0.86% |
Data Source: Groww, Value Research as of December 2025
Why Quant Leads: Quant Small Cap follows an aggressive, theme-based approach using predictive analytics. The fund takes concentrated bets on sectors like healthcare, energy, and financials. This works brilliantly in bull markets but expect sharper falls during corrections.
Why Nippon Is the Safe Choice: With ₹68,572 crore AUM, Nippon India Small Cap is the largest fund in this category. Manager Samir Rachh has been at the helm since 2017 and follows a diversified approach across 100+ stocks. The trade-off is slightly lower returns for reduced volatility.
👉 Tip: Limit small-cap allocation to 10-20% of your equity portfolio. These funds require patience during market downturns.
For more on small cap fund strategies, read our detailed guide.
Mid-Cap Funds: The Sweet Spot
Mid-cap funds invest in companies ranked 101st to 250th by market capitalisation. These businesses have proven their viability but still have room to grow.
Best For: Investors with 5-7+ year horizons seeking balance between growth and stability.
Fund Name | 5Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|
Motilal Oswal Midcap Fund | 34.94% | 37,501 | 0.72% |
Edelweiss Mid Cap Fund | 32.46% | 11,297 | 0.38% |
Invesco India Mid Cap Fund | 25.90% | 7,406 | 0.65% |
HDFC Mid Cap Opportunities Fund | 26.15% | 84,061 | 0.72% |
Data Source: Equitymaster, Groww as of December 2025
Why Motilal Oswal Dominates: The fund follows a high-conviction strategy, holding just 25-30 stocks. Its promoters have invested ₹17.7 billion of their own money in the fund. This "skin in the game" aligns fund manager interests with yours. The fund has delivered 32.27% annualised SIP returns over 5 years.
Why HDFC Offers Stability: With ₹84,061 crore AUM, HDFC Mid Cap Opportunities is the category giant. It holds 72 stocks across sectors, reducing concentration risk. Ideal for investors who want mid-cap exposure without extreme volatility.
For a detailed comparison of mid-cap versus small-cap strategies, explore our analysis.
Flexi-Cap Funds: Flexibility Meets Opportunity
Flexi-cap funds can invest across large, mid, and small-cap stocks without restrictions. The fund manager adjusts allocation based on market conditions.
Best For: Investors wanting diversified equity exposure with professional market-timing decisions.
Fund Name | 5Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|
HDFC Flexi Cap Fund | 24.35% | 91,041 | 0.75% |
Parag Parikh Flexi Cap Fund | 20.90% | 1,29,783 | 0.63% |
JM Flexicap Fund | 18.71% | 2,261 | 0.42% |
Motilal Oswal Flexi Cap Fund | 16.60% | 12,500 | 0.68% |
Data Source: Value Research, INDmoney as of December 2025
Why Parag Parikh Stands Out: This fund holds approximately 15-20% in international stocks like Alphabet, Microsoft, and Amazon. For NRIs already earning in foreign currencies, this provides portfolio diversification beyond Indian markets. The fund also maintains a cash cushion during overvalued markets.
Why HDFC Delivers: The fund manager dynamically shifts between market caps based on valuations. Currently, large-caps form about 55% of the portfolio, providing stability during uncertain times.
👉 Tip: Flexi-cap funds work well as a "core" holding in your portfolio. Add satellite positions in small-cap or thematic mutual funds for enhanced returns.
Large-Cap Funds: Stability First
Large-cap funds invest in the top 100 companies by market capitalisation. Think Reliance, HDFC Bank, TCS. These are established businesses with predictable earnings.
Best For: Conservative investors, those nearing retirement, or anyone wanting equity exposure with lower volatility.
Fund Name | 5Y CAGR | AUM (₹ Cr) | Expense Ratio |
|---|---|---|---|
Nippon India Large Cap Fund | 21.33% | 50,312 | 0.70% |
ICICI Prudential Bluechip Fund | 18.90% | 78,160 | 0.80% |
Canara Robeco Bluechip Equity Fund | 16.50% | 17,527 | 0.50% |
HDFC Large Cap Fund | 17.99% | 40,618 | 1.00% |
Data Source: Scripbox, Bajaj Finserv as of December 2025
Nippon vs ICICI: Nippon India Large Cap has outperformed with 21.33% 5-year CAGR, but ICICI Prudential Bluechip offers lower volatility. Canara Robeco has the best risk-adjusted returns with lowest maximum drawdown among peers.
For those comparing mutual funds vs fixed deposits, large-cap funds offer a balanced alternative with better inflation-beating potential.
Index Funds: Low-Cost Market Returns
Index funds passively track market indices like Nifty 50. They do not try to beat the market. They match it.
Best For: Investors who believe most active fund managers cannot consistently outperform indices (research suggests 70% fail to do so over 3+ years).
Fund Name | 5Y CAGR | Expense Ratio | Tracking Error |
|---|---|---|---|
UTI Nifty 50 Index Fund | 15.80% | 0.20% | 0.02% |
HDFC Nifty 50 Index Fund | 15.75% | 0.20% | 0.03% |
Nippon India Index Fund - Nifty 50 | 15.72% | 0.21% | 0.02% |
Data Source: Tickertape, smallcase as of December 2025
Why Index Funds Make Sense: With expense ratios as low as 0.20% compared to 1-2% for active funds, every rupee saved on fees compounds for you. Over 20 years, a 1% expense difference can mean 15-20% less wealth.
However, in India's still-developing market, skilled active managers in mid and small-cap segments continue to generate alpha. Use index funds for large-cap exposure, active funds for smaller companies.
SIP Wealth Creation: The Power of Time
The most powerful wealth-building tool is not picking the "best" fund. It is starting early and staying consistent.
Here is how a ₹10,000 monthly SIP grows at different return rates:
Investment Period | At 12% CAGR | At 15% CAGR | At 18% CAGR |
|---|---|---|---|
5 Years | ₹8.2 lakh | ₹8.9 lakh | ₹9.6 lakh |
10 Years | ₹23.2 lakh | ₹27.9 lakh | ₹33.6 lakh |
15 Years | ₹50.5 lakh | ₹67.7 lakh | ₹91.6 lakh |
20 Years | ₹99.9 lakh | ₹1.51 crore | ₹2.31 crore |
Calculation based on standard SIP compounding formula
Notice how the difference between 10 and 20 years is not 2x. It is 4x or more. This is compounding at work. The earlier you start, the more time your money has to multiply.
👉 Tip: Use a SIP calculator to model your specific goals. Even ₹5,000 monthly can build substantial wealth over 15-20 years.
For strategies on SIP vs lump sum investing, read our comparison guide.
NRI-Specific Considerations for Wealth Creation
Investing as an NRI involves unique rules and restrictions. Getting these wrong can cost you significantly.
Account Requirements
All mutual fund investments must be made through NRE or NRO accounts. You cannot invest from a foreign bank account directly.
NRE Account: Fully repatriable. Invest here if you plan to take money back abroad eventually. Use this for NRE fixed deposit alternatives and equity investments.
NRO Account: Limited repatriation (up to $1 million annually). Use this for income generated in India like rental income or proceeds from selling Indian property.
US and Canada NRI Restrictions
If you hold US or Canadian residency, your options are limited. Due to FATCA compliance and PFIC (Passive Foreign Investment Company) regulations, only 8-10 AMCs accept investments from these countries:
SBI Mutual Fund, HDFC AMC, ICICI Prudential AMC, UTI AMC, Aditya Birla Sun Life AMC, L\&T Investment Management, Sundaram AMC, and PPFAS Mutual Fund.
Warning for US NRIs: Indian mutual funds are classified as PFICs in the US. This means potential taxation of 40-50% on gains. Consult a US-India cross-border tax specialist before investing.
For US NRIs, GIFT City investments offer a potentially more tax-efficient alternative.
Taxation on Mutual Fund Gains (2025 Rules)
The 2024 Budget changed mutual fund taxation. Here are the current rates for NRIs:
Equity-Oriented Funds (65%+ equity allocation):
Holding Period | Tax Rate | TDS at Source |
|---|---|---|
Less than 12 months (STCG) | 20% | Yes |
More than 12 months (LTCG) | 12.5% on gains above ₹1.25 lakh | Yes |
Debt/Hybrid Funds (purchased after April 1, 2023):
Holding Period | Tax Rate | TDS at Source |
|---|---|---|
Any period | Taxed at slab rate | Yes |
Source: Income Tax India, Bajaj Finserv
Important: TDS is deducted at source when you redeem. If your actual liability is lower, claim a refund when filing your NRI income tax return.
For detailed guidance on mutual fund taxation for NRIs, read our comprehensive guide.
DTAA Benefits
Double Taxation Avoidance Agreements between India and countries like UAE, UK, and Singapore can help reduce your tax burden. The India-UAE DTAA is particularly beneficial for NRIs in the Gulf.
You will need a Tax Residency Certificate (TRC) from your country of residence to claim DTAA benefits.
Building Your Wealth Creation Portfolio
Here is a framework I recommend to NRIs based on investment horizon:
15+ Year Horizon (Age 25-35)
You can afford to take risks. Time is on your side.
Suggested Allocation:
- Small-Cap Funds: 20%
- Mid-Cap Funds: 30%
- Flexi-Cap Funds: 30%
- International/Global Funds: 20%
Consider funds like DSP Global Equity Fund for international exposure.
10-15 Year Horizon (Age 35-45)
Balance growth with stability. You have time to recover from downturns but should not bet everything on high-risk options.
Suggested Allocation:
- Small-Cap Funds: 10%
- Mid-Cap Funds: 25%
- Flexi-Cap Funds: 35%
- Large-Cap/Index Funds: 20%
- Debt/Hybrid Funds: 10%
5-10 Year Horizon (Age 45-55)
Capital protection becomes important. Reduce small-cap exposure and increase stable assets.
Suggested Allocation:
- Mid-Cap Funds: 15%
- Flexi-Cap Funds: 25%
- Large-Cap/Index Funds: 35%
- Debt/Hybrid Funds: 25%
For hybrid mutual fund strategies, explore balanced advantage funds that automatically adjust equity-debt allocation.
Planning Retirement
If you are building a retirement corpus, consider dedicated retirement funds like ICICI Prudential Retirement Fund or Tata Retirement Savings Fund. These have lock-in benefits and age-based asset allocation.
For NRIs planning to return to India, understanding RNOR status benefits can help optimise your tax liability during transition.
Common Wealth Creation Mistakes to Avoid
In 12 years of advising NRIs, I have seen the same errors repeatedly:
Chasing Last Year's Winners: The fund that topped charts last year may underperform this year. Sector rotations happen. Invest based on long-term track records, not recent performance.
Over-Diversification: Owning 15 mutual funds does not reduce risk. It creates confusion and overlapping holdings. 4-6 well-chosen funds across categories is sufficient.
Stopping SIPs During Market Falls: This is exactly when you should continue. Lower NAVs mean you buy more units. Rupee-cost averaging works only if you stay consistent.
Ignoring Expense Ratios: A 1% difference in expense ratio over 20 years can reduce your wealth by 15-20%. Always choose direct plans over regular plans.
Not Reviewing Annually: Markets change. Fund managers leave. Review your portfolio once a year and rebalance if needed.
For more on common financial mistakes NRIs make, read our detailed guide.
GIFT City Alternative: USD-Denominated Investing
For NRIs earning in foreign currencies, rupee depreciation is a real concern. The INR has depreciated approximately 3-4% annually against the USD over the past decade.
GIFT City mutual funds offer an alternative. These are USD-denominated funds managed by Indian AMCs but operating from India's International Financial Services Centre.
Benefits:
- No capital gains tax for NRIs
- USD denomination protects against rupee depreciation
- No need for NRE/NRO account
- Easier repatriation
Explore GIFT City investment options or check our Mutual Funds Explorer for available schemes.
Tata India Dynamic Equity Fund is one example of GIFT City funds worth exploring.
Your Next Steps
Wealth creation is not about finding secret funds. It is about starting early, staying consistent, and avoiding emotional decisions.
If you are just beginning:
- Determine your investment horizon and risk tolerance
- Choose 3-4 funds across categories using the rankings above
- Start SIPs that you can sustain for 10+ years
- Review annually, rebalance as needed
For NRI-specific guidance, join our WhatsApp community where many NRIs discuss investment strategies daily. Or download the Belong app to explore GIFT City investment options that offer tax advantages for NRIs.
Your future self will thank you for starting today.
Sources
- Groww Mutual Fund Data: https://groww.in
- Value Research Fund Analysis: https://www.valueresearchonline.com
- INDmoney Fund Comparisons: https://www.indmoney.com
- Scripbox Fund Rankings: https://scripbox.com
- Equitymaster Fund Research: https://www.equitymaster.com
- Income Tax India: https://incometaxindia.gov.in
- AMFI (Association of Mutual Funds in India): https://www.amfiindia.com
- Tickertape Fund Screener: https://www.tickertape.in
Disclaimer: Mutual fund investments are subject to market risks. Read all scheme-related documents carefully before investing. Past performance is not indicative of future returns. This article is for informational purposes only and should not be considered investment advice. Consult a qualified financial advisor before making investment decisions.
