Mailbag: I want to invest Rs 10,000 every month

A friend recently asked me about how to invest in mutual funds.
He said that he was aware of the concept of mutual funds and was ready to invest Rs 10,000 every month for next decade or so.
As a friend, I was really happy that there are still people in my generation who are interested in investing for decades and not months. I decided that it would be interesting to share what I told him with my readers too.
Before, I gave him any advice, I confirmed the following –
– He is adequately insured.
– He has health insurance.
– He has money in liquid assets to act as emergency funds.
– He is already using his 1 lac limit for saving taxes. So, I didn’t check for tax saver funds.
– He contributes to his PPF account regularly.
– He would not require this money which goes into mutual funds for atleast next 5 years.
– He is not interested in investing directly in equities.
The last one was to ensure that he was not investing in long term assets with an assumption of making money in short term. Also, anything less than 5 years may not be a good idea when discussing instruments which depend on equity markets.
I advised him to divide his 10K into 3 parts – 4K, 3K & 3K. I think 3 funds would offer sufficient diversification. I suggested him the following 3 funds to start a Systematic Investment Plan:
  1. HDFC Top 200 (link)
  2. HDFC Prudence Fund (link)
  3. Franklin Templeton India BlueChip (link)
mutual fund SIP
How to divide 10K among 3 different Mutual Fund Schemes
I chose these funds because these have been in existence for atleast a decade. Hence they have proven themselves over multiple market cycles, i.e. ups and downs.
These funds may not give the best returns among the available universe of funds. But they have historically stayed in top 10% consistently. And that is no mean achievement considering the volatile nature of Indian stock markets.
Also, these funds don’t fall as much as the market does during correction.
I also suggested that he should go for GROWTH option and not DIVIDEND payout or reinvestment one. This choice is based on the principle of compounding.
Now this approach may not be the best one or the perfect one. But it is sane, simple and easy to implement.


  1. Hi, I am a regular reader of your posts, and I would have thought that you would have recommended index funds instead of actively managed MFs. Although the funds recommended by you have performed well in the past, there is no guarantee that they'd continue their performance in the future. In fact, the scales are now tipped in favour of underperformance going by the law of averages and going by the size that these funds have achieved. Also, what if the Star fund manager leaves the fund house ? Given the time horizon, think you should recommend ETFs.


  2. It's a bit surprising that you included FT India Blue Chip Fund instead of SBI PSU, Kotak 50 or DSPBR Focus 25 for that matter!

  3. Interesting article! The situation luckily matches my situation too and i agree with the selection of funds.

  4. Hi Stable Investor,

    Please share your outlook on ONGC in the present scenario. I asked you a question on the same in the previous post.


  5. Hi, No idea about HDFC prudence, others are right pick. Why didn't consider QLTEF instead of one HDFC fund? One reminder too We all are waiting for new DM portfolio 😉

  6. Great. Another reader has requested us to address his query. We will be out with a response to his query too. And the discussion and debate which happens in comments section is quite an eye-opener and enriching.

  7. Hi SI, I looked at the 3 mutual funds you mentioned – I noticed they have a well distributed portfolio : 10-12% in IT (Infosys) , negligible in Pharma, and heavy in Oil and Gas. My personal issue is, I am very heavy in Oil and Gas : I got 50% of my holdings in Reliance and 8% in ONGC (which we discussed about). I also have HUL and L&T, UltraTech, Tata Steel and all the ADAG companies. I have no exposure to IT and Pharma. I need to increase my exposure to IT and Pharma, but gradually. Do you know of any decent funds that are exclusive to IT and Pharma ? I want to use your idea only (3+3+4)……but 2 of those should be IT and Pharma based….plus, one of the 3 funds mentioned by you. What do you suggest ?

    Also, at what levels do you think one can invest in ITC ? I dont want to repeat my ONGC mistake again 🙂

  8. I would suggest following.
    Large Cap – Franklin Bluechip – 2K
    Large and Mid Cap – Quantum Long term Equity – 3K
    Multi Cap – HDFC equity – 3K
    Mid and Small Cap – IDFC Premier Equity – 2K

  9. Sector Fund:
    Sectoral funds do come with their own set of risks. They can be really volatile at times. We hope you understand the inherent risk of investing in sector-specific mutual funds. Here is a list of IT funds which operate in Indian markets ( Generally, these funds are skewed towards larger companies of the sector like Infy, TCS, etc

    For Pharma Funds, you can check this link –

    One point that you should remember is that while investing in a specific sector (instead of going for diversification), an investor is virtually claiming that he understands the sector pretty well and knows about how future would (and not ‘might’) pan out for the sector. This is definitely possible and one can do it with his level of expertise. Just a thought to ponder over.

    A valuation expert may be in a better position to answer this question. 😉 But ITC does seem overvalued at present. But the sad part about FMCG Companies has been that they continue to look overvalued on various parameters for years. Even then they have made money for investors 🙂
    (Example – Nestle)

    Small:Mid Cap Funds:
    ICICI Discovery, IDFC Premier are some of the good ones. You can check a listing of such funds at

    What exactly is you time horizon for all the stocks/MFs
    which you mentioned in your query?

  10. Thanks for the prompt response, SI…..I am a buy and forget type of investor……I would like to hold for a very long time….most of my money is in FDs, postal and PPF (which you recommend in one of your posts), so I am not financially dependent on my investments in the stock market, but hope they increase in value over a period of time. Also, I would like to gradually increase my stock/mutual fund investment. Rs.10,000 per month, which you recommend, is very reasonable.

  11. As far as the investments, I mentioned are concerned….Reliance investment was made by my dad in my name when I was a kid in the 1980s….so it is very old…..ADAG companies also I got that way….rest are recent, made when I began earning money.

  12. This is great.
    Being single with no big financial obligations, you have the time and the (financial) might to build a solid foundation for your financial future. 🙂

  13. SI, there is a recent article (very -ve) from Business Standard on ONGC I wanted to post..but cannot as this website does not accept links I think……please check it out and waiting for your comment.

  14. Thanks for sharing. ONGC and other PSUs have been govt's milking cows in the past. We'll try to make some sense out of this and let you know.
    What are your views? And what's your background Ranger?

  15. On an average, any MF portfolio these days consist of 20 stocks. For an investment of 10K per month, if we are advising 3 MFs, it is almost equivalent to splitting of the amount among 60 stocks which is way too much dilution.

    This I believe in too much diversification. I prefer to pick only one MF i.e. HDFC Top 200. Personally, I did the same 10K investment per month for the last 3 years into only one MF i.e. HDFC Midcap opportunities. I am quite happy about it.

  16. SI, I didn't realize at the time I was investing, but ONGC might give great dividends and may be extremely well run – but fact is when some idiot minister of an unpopular government sneezes, the share falls. I dont think people should invest in PSU stocks as a matter of principle because some stupid bureaucrat or politician controls these PSUs completely without care for minority shareholder concerns…..As I told you , I bought ONGC @345, and that is the only reason I am holding on to it….as soon as it crosses that figure, I will sell off my shares and invest the amount in an FD. I have investments in 11 other companies – none have given me as much headache as this ONGC in the last 3 weeks. All have been extremely profitable and happy investments – except maybe Tata Steel, for which I have sentimental value, as it was the first stock I bought with my own money, and will always hold on to regardless of what happens.

    But regarding my backround, I am an IT consultant….but so wary of the IT industry that I have no exposure to any IT company…I want to keep my job and my investments different…..I got mad love for Reliance, as I told you, 50% of my stock holdings are in Reliance…. bought by my dad for 10 rupees or something in 1980s. Haven't sold a single share. Have complete faith in Mukesh Bhai 🙂

    As I tell my friends : trust just 2 people in your life, one with your vote and the other with your money : Narendrabhai and Mukeshbhai, both Gujjus 🙂

  17. By the way, I develop Android apps as a hobby….I am in the process of developing a few really cool apps targeted at traders and investors in the Indian stock market – when I do so, I hope you wont mind me sharing them with you and your readers 🙂

  18. ONGC UPDATE : Just listened to an interview on ET Now of Sudhir Vasudevan, the CMD of ONGC. This guy is a lion among sheep. Was completely critical of government and the subsidy burden it imposes at will on ONGC. No nonsense about “inclusive growth”, “inclusive development”, “corporate social responsibility” etc. Was very blunt. Asked how could anyone expect ONGC to sustain on a daily basis if you eat away all its gains through subsidies. When the pretty anchor asked him, ” So CLSA has upgraded ONGC to “BUY”. Are you happy?” ….He said: ” Well, a Buy rating is rational if there was no subsidy burden, otherwise if government keeps burdening us with subsidy how can a “buy” on ONGC be justified ? ” ….This man is the CMD of ONGC and he questions “Buy” rating of his own company…What a man !! Won't be surprised if he is sacked soon and the crooks at the centre bring in a more pliant person who sings their song.

  19. True. Too much diversification can be bad.

    But lets consider one scenario. Suppose a person investing for 10 years decides to invest in just one fund. All is hunky dory for 9 years. And then, because of any reason 'X' the fund erases the good work of 9 years.

    At that point, one would feel that it would have been better to diversify a little more, even if that came at an expense of lesser % gains.

  20. Thanks for sharing Ranger.

    You have made a valid point. When even the CMD is questioning his company's promoter's intention, should that stock be bought? This reminds of what Mr Buffett has said – “You should invest in a business that even a fool can run, because someday a fool will.” And oil does seem to be here to stay. But we may be wrong. 😉

  21. Definitely. We would love to test and share it.
    And as far as demand for screener apps is concerned, we think that it is a good starting point to start one's stock research. We would personally be very interested in using such apps. 🙂
    Keep us posted about the same.

  22. Hi Stable Investor,

    I was surfing regarding to Indian stocks and came across First thing I have noticed that my long term vision is matching with your suggestions (Mainly Stock investment). After reading almost all the article, I couldn't able to stop my self from asking questions to you. I hope you can address following two questions:

    (1) We are expecting a Baby in this February,2014 and I would like to Invest some money for his future. (Time Span : 20 years from now , I can invest ~ 300K per year)

    (2) I am 28 years old and currently in US. I didn't understand U.S market specially stock market well though I have been here since 2007. I always like to invest money in Indian stock market/property/gold etc.. My current portfolio matching ~70% with Dead Monk Portfolio. I can invest ~ 100K per month (separate from Baby's money) for another five year. So what would be the best strategy for me now onwards?

    Note : I have my emergency fund handy with me.

    Thanks in advance!!

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