Best funds to invest in: top picks & how to choose

By Juliet Schooling Latter on 10 December 2025 in Best performing funds

There are thousands of investment funds available — so how should you choose? What do you need to know, and how can you build the most suitable portfolio?

Picking the best funds to invest in can certainly seem overwhelming. There are numerous asset classes available, investment strategies to consider, and questions to answer.

For example, what are your short and long-term goals? Would you prefer an equity or fixed income portfolio? Is an active or passive approach more suitable?

Our guide explains the types of funds available, the criteria to use, the potential risks to consider, and the importance of continuously monitoring your choices.

Types of funds worth considering

Let’s start by looking at the different types of funds that are available. Generally, portfolios are split by asset class and investment approach. The Investment Association initially divides funds into six broad areas. These are: equity, fixed income, money markets, mixed assets, property, and others. These categories are then subdivided into more specific categories. For example, there are sectors for global equity funds, UK corporate bond portfolios, and European smaller companies.

There are also sectors for funds investing in specific industries, such as technology, as well as those that embrace multiple asset classes. A prime example is Mixed Investment 20-60% Shares. Funds can also be divided by investment approach. For example, if you’re after an extra source of income, you may opt for a fund in the UK Equity Income sector.

How to identify a best fund: key criteria

So, how do you know which are the best funds to invest in for 2026? Here are the three most important factors we believe you should consider.

• Stated objective: The chosen fund’s goals must be aligned with your objectives. You need to understand what the manager is trying to achieve on your behalf.
• Past performance: While past performance is no indicator of future returns, it does give you an idea as to whether a fund manager has delivered over different time periods and different stock market cycles – and what has influenced those returns.
• Fees: Pay close attention to the fund’s ongoing charges, as they can significantly impact your overall return. Active funds will typically have higher fees than passive portfolios, although the nature of passive means they aim to match the benchmark, not outperform.

Popular investment themes in UK right now

Several sectors have been particularly popular with UK investors during 2025, according to data compiled by the Investment Association. These include those focused on North American and global companies, whereas the intriguingly named volatility managed sector has also been a good seller.

The volatility managed sector is for funds that aim to manage their returns within a specified level of volatility. When things are uncertain, as they are right now, this approach makes sense. A fund that we like in this area is Rathbone Strategic Growth Portfolio. This is a multi-asset fund has a target of cash plus 3-5% per annum over a five-year period, delivered in a risk-controlled framework.

Overall, the most popular sector with UK investors is the IA Global sector. This is for funds that invest at least 80% of their assets in global equities. They must also be diversified by geographic region. The benefit to investors is exposure to some of the best companies in the world, though a potential downside is that too much choice for the manager could be counterproductive.

Case study – FundCalibre Elite choice

Investing in a UK-focused fund is a popular option, and there are plenty of attractive portfolios in this sector. One that we like is Artemis UK Select. This is a high-conviction, multi-cap UK equity fund managed by two very experienced managers, Ed Leggett and Ambrose Faulks. We see this as one of the premier UK equity funds due to its impressive track record and particularly attractive for investors will to embrace more risk in the pursuit of long-term gains. Artemis UK Select has a prestigious Elite Rating from FundCalibre that’s reserved for the very best portfolios. No more than 10% of portfolios in any sector will be given this acknowledgement.

Our analysis begins with AlphaQuest, our proprietary quantitative screening tool, which focuses on future performance by estimating the likelihood that a manager will deliver superior returns. Those who meet the criteria will be grilled by our team on key factors, including their investment philosophy and portfolio construction approach. All the research gathered will then be subject to peer review within the team before a final decision is made on whether it merits an Elite Rating.

Active vs passive funds: which is right for you?

A key decision when searching for the best funds to invest in is choosing between active and passive management.

• Actively managed funds are run by professional fund managers who use their experience, research, and judgement to select investments they believe will outperform the wider market. Rather than simply tracking an index, these managers actively decide what to buy and sell in response to changing economic conditions, company performance, and market trends.
• Passive funds, by contrast, simply aim to replicate the performance of a particular stock market index or benchmark, rather than beating it.

Of course, active management comes at a cost: fees are typically higher, and there’s no guarantee that every manager will outperform their benchmark. That’s why FundCalibre focuses on identifying those managers who have consistently demonstrated skill and the ability to beat their peers and the wider market.

How to choose the right fund

The good news is that there’s no shortage of well-managed investment funds, so your decision should be based on several factors. Here are just a few to consider:

• Personal goals: It all depends on what you want to achieve. For example, if you’re saving for retirement and choosing which SIPP funds to invest in, your decision will be influenced by your investment time horizon.
• Attitude to risk: Are you relaxed about stock market volatility, or does it scare you? Your attitude will determine whether you’re comfortable with riskier investments that offer the potential for higher rewards.
• Cost considerations: Don’t overlook the various fund fees. These vary between portfolios, so ensure you know exactly how much you’re being charged.
• Portfolio construction: You’ll also need to consider what other investments you have in place. For example, you may want a core-satellite strategy.

This sees the bulk of your assets in a large, often global portfolio, with other ‘satellite’ positions around the outside giving you exposure to more niche areas.

Building a balanced fund portfolio

Most investors benefit from a diversified portfolio that’s weighted towards their particular investment objectives. This means having the right balance of asset classes.

For example, if they want to achieve growth, have a decent investment time horizon, and don’t mind volatility, then they should invest more in equities. Conversely, if they are approaching retirement or are extremely risk-averse, a portfolio weighted more towards safer fixed-income assets could be more appropriate.

In many cases, you can have a mix of asset class exposures. These will usually include equities, bonds, property and some alternatives, such as commodities. You can also diversify within asset classes. For example, having a mix of UK and global equity funds in whatever ratio is most appropriate for your goals and attitude to risk.

Risks to watch when investing in funds

While no investment is entirely risk-free, it’s important to remember that market ups and downs are a normal part of investing. You should only invest money you won’t need in the short term but don’t be discouraged by short-term dips. It’s only a loss if you sell, and historically, stock markets have tended to rise over the long run, rewarding investors who stay the course.

However, here are a few potential red flags:

1. The fund manager is leaving — Why are they leaving? Who will take over? Is the replacement’s track record similar? The manager at the helm is the most crucial factor, so a departure will need to be examined closely.
2. Underperformance — A dip in performance can be unsettling, but it doesn’t always point to poor management. It’s important to investigate whether the decline stems from broader market conditions or specific decisions made by the fund manager. Similarly, if a fund is trailing its peers, look into the reasons behind it, underperformance might reflect wider market trends rather than the manager’s skill.
3. Change of investment focus — A fund’s investment philosophy dictates how it’s run. Is the switch due to external conditions or an admission that the original thesis isn’t working?
4. Changes to inflows — If investors are leaving the fund in their droves, you’ll need to find out why. What do they know? Similarly, very high inflows may adversely affect the way managers can run portfolios.
5. Other — A lack of information from the fund house, a portfolio suddenly being rebranded, the fund house’s takeover by a rival, and a manager being too stubborn are other red flags to consider.

While risks can never be removed entirely, they can be mitigated. As well as diversifying portfolios, you can regularly review positions and rebalance as needed.

How to get started: from research to investment

Your journey to finding the best funds to invest in must start with what you’re looking to achieve. Do you need a regular source of income, or is the goal building a war chest for your retirement? How do you know if your faith – and money – is being put in the right portfolio?

Here are the steps you need to take:

• Be clear on your investment goals: What are your objectives, and how much risk are you willing to take?
• Decide your asset allocation: Which asset classes will deliver your desired results? Do you want active or passive management?
• Choose your funds: Use FundCalibre’s research to identify the most suitable funds to meet your needs.
• Be tax-efficient: Will you be holding your funds within an Individual Savings Account or a Self-Invested Personal Pension?

Still unsure?

Monitoring your fund portfolio over time

Some bad news. Just because you’ve chosen some investment funds doesn’t mean you can sit back and forget all about them. Regularly monitoring your choices is essential. Make a habit of checking in with your investments every quarter and consider a full annual analysis. Not only does this highlight if a fund has underperformed, but it also gives you the opportunity to tweak your asset allocation if your personal situation has changed.

When “best” funds may not be right for you

Just because a fund has hovered around the top of the performance tables over the past few years doesn’t mean it will be suitable. Many people will base their decision on which are the best UK funds to invest in now on the returns generated over the past year. However, these may be skewed by various factors. For example, UK-focused funds may have been adversely affected by temporary global stock market issues.

FAQs

Final thoughts & FundCalibre next steps

Starting your investment journey can seem intimidating, but the good news is that finding the best funds to invest in is relatively simple. You just need to be clear about your investment goals, understand how much risk you’re willing to take, conduct your research, and regularly revisit your decisions.

We also provide a list of top funds and access to free investment courses that tells you exactly how to start your investment journey.