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The best mutual funds to invest in for 2026 paint a picture of optimism – though they stop well shy of implying that everything that trades will go up and to the right across the entirety of the coming year.
That’s OK! Stock-market pundits entered 2025 with puffed chests and elevated hopes, believing equities were set to soar under a new, business-friendly administration. And sure, they did – the S&P 500 is set to finish the year with a gain in the high teens that easily surpasses its long-term annual average.
But while the destination was right, the journey was much different than expected, with a flurry of tariffs, rapid policy shifts and other issues driving stocks within an inch of a bear market before a violent rebound put stocks back into flight.
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Lesson learned: As long as you look at market outlooks as a way to spot potential opportunities, rather than a laser-precise roadmap of every step to come, you should do all right.
With that in mind, let’s look at some of the best mutual funds to invest in for 2026. These funds have been selected for their ability to capitalize on trends expected to emerge in the year to come, as well as other vital considerations, such as fees, investment strategy, management track record and more.
Data is as of December 29, 2025. Dividend yields represent the trailing 12-month yield, which is a standard measure for equity funds. SEC yields reflect the interest earned after deducting fund expenses for the most recent 30-day period and are a standard measure for bond and preferred-stock funds.
Fidelity 500 Index Fund
(Image credit: Courtesy of Fidelity)
- Fund category: Large blend
- Assets under management: $738.6 billion
- Yield: 1.1%
- Expense ratio: 0.015%, or $1.50 annually for every $10,000 invested
“The U.S. is set to remain the world’s growth engine, driven by a resilient economy and an AI-driven supercycle that is fueling record capex and rapid earnings expansion.”
That’s what J.P.Morgan’s Dubravko Lakos-Bujas has to say about America heading into 2026, and he’s hardly alone. Numerous research firms provided bullish outlooks for the U.S. economy in the year ahead, and that’s reflected in general optimism about where the S&P 500 will end up by New Year’s 2027.
Specifically, roughly a dozen research firms’ price targets for the index average out to about 7,600, which implies more than 10% upside for U.S. stocks over the next 12 months.
So as boring as it might be to lead with an S&P 500 index fund on our list of the best mutual funds to invest in for the coming year … well, we’re going to.
The Fidelity 500 Index Fund (FXAIX) is one of the most cost-effective ways to buy the S&P 500. Fidelity charges a skinflint 1.5 basis points (a basis point is one one-hundredth of a percentage point) that undercuts even the cheapest S&P 500 ETF. Not to mention, FXAIX and most other funds from this provider don’t require a minimum initial investment, so even investors with little cash to start with can dig in right away.
FXAIX is market cap-weighted, which means the fund allocates the most assets to the largest companies, which in turn means that companies like Nvidia (NVDA) and Apple (AAPL) have an outsized effect on performance.
While there are other actively managed Fidelity funds that can take advantage of continued growth in the U.S. economy, very few funds out there in the large-cap space can do better than the S&P 500 over the long-term, especially once you include fees, which are virtually always cheaper for index funds. So, why roll against the odds?
Learn more about FXAIX at the Fidelity provider site.
T. Rowe Price Financial Services Fund
(Image credit: Courtesy of T. Rowe Price)
- Fund category: Financial
- Assets under management: $1.9 billion
- Yield: 1.0%
- Expense ratio: 0.83%
Financial firms such as banks and insurers are among the most popular picks for 2026 from a sector standpoint.
“Several tailwinds are converging for financials and are not yet priced in,” Deutsche Bank says in its 2026 look-ahead. Among them, according to independent research firm CFRA’s chief investment strategist Sam Stovall, are “lower rates continuing through 2026; improving credit quality; expected M&A turnaround; declining credit spreads.”
T. Rowe Price Financial Services Fund (PRISX) is one of the best-rated mutual funds to invest in this sector, boasting a Silver Medalist rating (forward-looking) and a four-star Morningstar rating (based off performance).
Comanagers Matt Snowling and Greg Locraft have built a 100-stock-plus portfolio of financial stocks. That’s almost exclusively made up of companies that are actually within the sector, such as Bank of America (BAC), Visa (V), and Chubb (CB), but the fund does have a carve-out for companies outside the sector (think providers of financial software) as long as they derive more than half of sales from doing business within financial services.
PRISX has been extremely productive over its history, including trailing 10- and 15-year average annual returns that are within the top 10% of its Morningstar category: funds that invest in the financial sector.
T. Rowe Price Financial Services requires at least $2,500 for an initial investment.
Learn more about PRISX at the T. Rowe Price provider site.
Dodge & Cox Emerging Markets Stock Fund
(Image credit: Courtesy of Dodge & Cox)
- Fund category: Diversified emerging markets
- Assets under management: $815.1 million
- Yield: 1.4%
- Expense ratio: 0.70%
One of the more interesting stories of the past year has been the resurgence of international stocks, which commonly underperform their U.S. counterparts but excelled in 2025 amid a weakening U.S. dollar and other drivers.
That goes not just for more developed markets, but riskier emerging markets as well – and the latter’s good fortunes could continue into 2026.
“Despite very encouraging performance this year for emerging markets and Chinese equities, they remain attractively valued and under-owned,” JPMorgan says in its 2026 year-ahead outlook, adding that MSCI Emerging Markets’ 12-month forward price-to-earnings (P/E) ratio remains at a 40% discount to the U.S., which is wider than the 32% average.
“We believe the combination of improving macro momentum, rising domestic liquidity, and a shift in households’ asset allocation toward equities should support a sustained recovery,” the group writes.
Dodge & Cox Emerging Markets Stock Fund (DODEX) is a roughly 300-holding portfolio of companies predominantly domiciled in emerging or “frontier” countries that the fund’s five-member investment committee views as undervalued despite having a “favorable outlook” for long-term growth.
While it allocates about a quarter of assets to mid- and small-cap stocks, the lion’s share of weight goes to mega-cap international firms such as Taiwan Semiconductor (TSM) and Alibaba Group (BABA).
It’s a much larger basket of holdings than is typically found in a Dodge & Cox fund, but the young fund’s strategy has been effective since its May 2021 launch; its 18.1% trailing three-year average annual return is more than 3 percentage points better than the category average and benchmark index.
“Dodge & Cox Emerging Markets Stock is proving the skeptics wrong,” Morningstar Associate Director Tony Thomas says about the fund’s Silver Medalist rating. “A modest tilt toward value stocks has helped, but it’s also found winners benefiting from strong growth, such as Taiwan Semiconductor Manufacturing – the portfolio’s top holding since mid-2023.”
DODEX requires a $2,500 minimum investment at the onset.
Learn more about DODEX at the Dodge & Cox provider site.
Vanguard Global Minimum Volatility Fund Investor Shares
(Image credit: Courtesy of Vanguard)
- Fund category: Large blend
- Assets under management: $2.0 billion
- Yield: 1.7%
- Expense ratio: 0.21%
CFRA’s 2026 price target of 7,400 is among the more conservative estimates for the S&P 500. It suggests the index will only deliver mid- to high-single-digit gains in the year to come.
“Why so cautious?” Stovall says. “Still-high valuations, an elevated Buffett Indicator, a softening jobs market, and midterm elections present formidable headwinds.”
Per the former, Stovall notes that as of November 21, the S&P 500’s market valued approached 180% of U.S. nominal GDP. “Historically, breaching 100% issued a cautionary signal, while eclipsing 120% raised a red flag.”
As for the latter, Stovall points to data since 1946 that shows the intrayear drawdown for midterm election years is 18%, which was the largest of all four years in the presidential cycle. “The S&P 500 also experienced the weakest average annual price gain (3.8%) and rose in price only 55% of the time,” he says.
Vanguard has plenty of funds to help hedge volatility, but the Vanguard Global Minimum Volatility Fund Investor Shares (VMVFX) is one of our favorite ways to approach it in 2026 – even if it’s not necessarily the purest way to go about it.
As the fund’s name might indicate, this is a “global” (read: U.S. and international) fund, though it’s split roughly 60/40 between domestic and international stocks. Manager Scott Rodemer holds more than 200 stocks of all shapes and sizes; large-cap stocks (70%) lead, but mid- (20%) and small-cap stocks (10%) are well-represented.
Rodemer isn’t free-wheeling; he oversees a rules-based strategy that revolves around the FTSE Global All Cap Hedged Index. And while he looks at each stock’s own volatility, he also examines each one’s role as it pertains to the broader portfolio’s overall volatility – in other words, shades of both low- and minimum-volatility strategies.
Like with other Vanguard funds, your initial investment in VMVFX will need to be at least $3,000.
Learn more about VMVFX at the Vanguard provider site.
T. Rowe Price High Yield Fund
(Image credit: Courtesy of T. Rowe Price)
- Fund category: Large blend
- Assets under management: $6.6 billion
- SEC yield: 6.2%
- Expense ratio: 0.70%*
Investors who want to offload their debt exposure to bond funds can do well to rely on actively managed funds whose leaders can adjust to shifts in the credit markets. That’s generally true, though doubly so in times when the environment for bonds isn’t exactly concrete.
One area of debt that BNP Paribas favors in its 2026 credit outlook is high-yield debt, aka non-investment-grade debt, aka junk.
“The credit market, like the economy, is K-shaped and the lower half isn’t experiencing ultra-fast growth, doesn’t have aggressive capex or bond issuance plans, and is deleveraging. Until that changes, the cycle can run longer and returns stay positive,” BNP Paribas’ analysts say. “Most things that are good about credit are in high yield: Spreads are decompressed, there’s no supply problem, and the asset class typically outperforms as the cycle matures.”
T. Rowe Price High Yield Fund (PRHYX) is one of the bigger and better names in the high-yield space. Fund manager Rodney Rayburn invests predominately in U.S. corporate junk (90%), though the 430-bond portfolio also provides a little exposure to international corporate debt, U.S. convertible debt and other below-investment-grade securities.
PRHYX allocates about 45% of assets to single-B bonds (BNP Paribas’ preferred rating in the space right now), another 33% in BB, and most of the rest in below-B debt.
It’s worth noting that Mike Della Vedova, who helps to make decisions in PRHYX, will leave the firm at the end of February 2026. This will give sole responsibility for the strategy with Rayburn. But Morningstar isn’t concerned.
“While Della Vedova’s expertise will be missed, we believe Rayburn is well-equipped to continue leading the strategy. He has been involved with the strategy since 2019 and has established a solid track record,” Senior Analyst Elbie Louw says.
PRHYX requires a $2,500 minimum investment to get started.
* 0.80% expense ratio is reduced by 10 basis points until at least July 31, 2027.
Learn more about PRHYX at the T. Rowe Price provider site.
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