It has been 10 years since I first started investing. When I look back at how I invested back in the day, it looks so simple. No complicated planning or exotic products. I always believe in starting with something simple. Whether it be investments, work, hobbies, nutrition, exercise, you name it. There are several advantages of this approach.

  1. For one, the initial learning curve is low so you can start immediately.
  2. It requires much less time and effort to implement.
  3. As a consequence of the above advantage, it is easier to stick with a simple plan for much longer than a complex one.
  4. You can always make small increments changes to the simple plan to suit your needs in the future.

If you look at my early investments (see below), you will see that I invested in just two funds. One is a large cap fund with 70% allocation and another is a mid cap fund (at the time) with 30% allocation. Investing what I can, month after month without fail. That got me thinking. Many people fail to start because they think too much before even starting. In investing, keeping things simple helps. So in this post I will give you some ideas on how to get started on a simple investment plan.

My investments in 2011

The basics

I am assuming you already figured out how to save as much as possible from your income. The problem we are trying to solve is -- how to invest the savings. Note here I am not saying how best to invest. There are certainly better but more complex investment methods to maximize your returns. But if you target maximum returns, you will most likely not even be able to start on your investment journey. Because there will be a lot to learn and figure out. My advice -- start simple, then layer in all the complexity you want.

The method I am describing here works best for a person who is just starting on their investment journey. If you are already a seasoned investor, you might not find anything useful.

Step 1: Choose your asset classes

There are a lot of asset classes one could choose from. But if you want to start with something simple, I suggest that you go with just two asset classes -- equity and fixed income. If you don't know what asset classes are, please read my earlier post on it.

The brief of it is that an asset class is something that you can invest in. Each asset class has certain characteristics. The characteristics could be liquidity, risk, volatility, returns etc. Liquidity is the measure of how easily and quickly you can get your money from the investment without paying extra fees or losing on returns.

A fixed deposit (FD) which falls in fixed income asset class will have a medium return (say 5%), zero volatility, almost zero risk (a good bank will not go bankrupt), but the liquidity is not so great. Some banks charge extra for breaking an FD before its maturity date, others might reduce the returns.

A stock (like HDFC) falls in the equity asset class, might have good returns (say 20%), will be very volatile and has some risk, but is usually very liquid. As you can see the characteristics of the asset classes are quite different.

Step 2: Asset allocation

Asset allocation is how much of your investment you will allocate to each asset class. For more information, you can read my post on asset allocation. In simple terms, asset allocation is a way to reduce the volatility and risk of your investments.

Volatility is the amount of variation in the value of your investment. For example, lets say you invested Rs. 10 lakhs in equity mutual funds for 1 year. At some point during the year lets say your investment drops to Rs. 8 lakhs and then it goes to Rs. 14 lakhs and finally settles at Rs. 12 lakhs. That is a lot of volatility since the value went up and down over the period of investment.

Lets say you invested the same amount Rs. 10 lakhs in fixed deposits. After a year, it might become Rs. 11 lakhs, but with zero volatility and risk. The value was just going up throughout the investment period. However, asset classes with lower risk and volatility come with lower returns.

A mix of different asset classes will reduce risk and volatility with moderate returns. Your asset allocation should depend on how much risk you want to take. I recommend 70% in equity and 30% in fixed income for your retirement portfolio. If you are risk averse, you can go for 50:50.

Step 3: Find some funds

Find a couple of funds in each asset class.


For equity mutual funds, to keep things simple, just invest in a couple of index funds if you don't want to choose a good actively managed fund. Don't over think expense ratio, tracking error etc when choosing an index fund. Search for "nifty index mutual fund" on google and find some. Choose anything with a long history and expense ratio <= 0.2%.

Here are some names from Value Research ordered by expense ratio. But don't take these as recommendations from me. Just a quick list so you have a starting point.

Fund NameMinimum InvestmentExpense Ratio (%)
IDBI Nifty Index Dir5,0000.16
IDFC Nifty Dir5,0000.16
ICICI Pru Nifty Index Dir | Invest Now1000.17
SBI Nifty Index Dir | Invest Online5,0000.17
Tata Index Nifty Dir | Invest Online5,0000.19
HDFC Index Nifty 50 Dir | Invest Online5,0000.20
HDFC Index Sensex Dir | Invest Online5,0000.20
Nippon India Index Nifty Dir | Invest Online1000.20
UTI Nifty Index Dir | Invest Online5,0000.20

If you like better returns at the risk of more volatility, you can choose a couple of "nifty next 50 index mutual funds". A couple of examples are ICICI Prudential Nifty Next 50 Index Fund and UTI Nifty Next 50 Index Fund. Again not recommendations.

Fixed Income

Here you have a lot of variety. You probably already have PF which comes under fixed income asset class. Any amount you want to invest beyond that can go into Fixed Deposits or Ultra short term debt mutual funds. Again don't overthink. Just go with something safe.

Step 4: Start investing

That is all you need to start investing. Use your asset allocation to divide your savings into equity and fixed income asset classes and invest blindly every month without fail. When you have got some more time you can go for more complex solutions to get better returns.


Many times it is not the complexity of things that makes us defer tasks. If you think simple, you will at least have a smaller hurdle to cross to get started. Don't procrastinate too much, don't over analyze and don't look for a few percent points better returns. Forget SIPs, multi-caps, duration funds, bucket system, multiple goals etc. First start simple, then add complexity.