Where to Invest 10 Lakh Rupees

Bloomberg

19-05-2025

Monika Halan
Personal finance expert, author and financial educator
THE IDEA
Keep It Simple
Wherever you are in your investment journey, you need to secure your today before investing for the future. Once you have money equal to six months of your monthly expenses in a bank fixed deposit or low-risk debt fund, health insurance and life insurance policies for your dependents — which I call the three seatbelts — you should start investing for the future.
For long-term investing — more than seven years on the investing horizon — it's best to use equity funds. For new investors, starting with a simple index fund is a good idea. The logic is this: the probability of one stock going to zero is real, but the probability of all 30 or 50 stocks in an index fund hitting zero on a particular day is extremely unlikely.
Even for high-net worth investors, keeping it simple rather than trying to invest in all sorts of experiments and exotic products is sensible. What we can predict is the long-term index return that, for India, should be in the range of 12% to 14% a year if taken over a 10-year period.
How to Invest It
Think of a thali. It is a plate with different food types — carbohydrates, proteins, fats, fiber — and each food type is needed for the body. Your investment pie is the same. You need a mix of asset types. Fixed deposits and debt funds give you liquidity, safety and predictability. Equity products give you growth.
You need allocations to both debt and equity. Split those 10 lakh rupees into baskets of horizons. For the investing horizon of more than seven years, go with equity funds. Within equity, you need further diversification for both growth and risk mitigation.
Start with allocating 50% to a large-cap index fund on a bellwether such as the Sensex or NIFTY50 and 25% each in a mid- and small-cap index fund. Ideally choose a large fund that has a low expense ratio and go for a direct plan if you are indexing. Savvy investors can choose active funds rather than the indexing route, but they will either need to get advice or do the work before choosing funds. Going with last year's winner is a strategy that is sure to lose.
As your net worth increases and once you have secured enough money in the 50-25-25 portfolio, you can shave off 5% to 10% from the large-cap fund to invest in higher risk areas that you might have a view on.
But keep the number of funds down to 10 or fewer. I often find that investors have 15 to 20 mutual funds because they want to diversify their holdings or they are chasing some story.
The ETF and/or Mutual Fund Play
UTI Nifty 50 (UTINIFG) and HDFC Nifty 50 (HDFCNIF) are a couple of the largest index funds, ranked by assets under management, offering large-cap exposure that fit Halan's recommendation, said Bloomberg Intelligence's Nitin Chanduka. Multi-asset funds such as ICICI Prudential's Multi-Asset Fund (ICPDMDG) and Kotak Multi-Asset fund (KAMALDG) can be considered where a fund manager has the discretion to invest across assets classes for investors looking to diversify. These two are the largest funds by assets.
The Risks
The risk of equity investing is going through a market event such as Covid-19 and the Trump tariff wars and losing your nerve. The risk of not having the stomach to hold onto your equity conviction while your net worth gets shaved overnight. The risk of a well diversified portfolio built for the long term is not the market, it is your emotions of fear.
Wild Card
Rather than splurging 10 lakh rupees on a holiday or clothes, invest in the people in your life. [If you have a salaried job, are a startup founder or an entrepreneur with money to invest] You probably have helpers at home — maybe a driver, a nanny or someone helping run your life. I like to help build an emergency fund for the people working in my home. They are often living on the edge, and you can prevent them from going under. Start with a bank fixed deposit. I have personally opened fixed deposits for my help and after a little bit of education, helped some of them set-up an equity fund.