The generator FD for the investment purpose

In the title of this post I used the word the generator FD, what is it and what do I mean by it?

As we know that the fixed deposit is considered to be one of the safe investment in India. The rate of return is also somewhat good. The main thing is it do not poses the risks that are in the stock market.

What is generator FD

Well, there is no such thing as the generator FD , this is a word that I have created or at least I do use it for my investment.

I consider it as an investment strategy.

What sort of strategy is it?

As per this I invest a sum of amount each month in the fixed deposit or I start a new fixed deposit account each month for a small amount. Now I choose to take out the interest each month by choosing the monthly interest payout options for it, further I will invest this payout interest to take any positions in the stock market.

What could be its benefit?

As I will be putting some amount for the fixed deposit , I will be getting some interest amount each month, as the fixed amount is increasing each month the interest from them will also increase each month. Now as the interest amount is also increasing each month and we are only investing the interest amount each month our principle amount is safe.

Who can use this strategy

Anyone who is investing some amount of money in the stock market who is having a source of income from job or anything else can use this.

Instead of investing the amount directly on the stocks or mutual funds create a FD of it and use the interest amount to invest in the stock market.

How can this strategy be implemented

There are many ways by which this strategy can be implemented. 

Anyone can start a new FD in any of the bank account these days and can handle that account from his mobile phone.

If you do not want to start multiple FD's you can go with the liquid funds as well and can even choose to cash out a small amount from it to invest in the stock market.

This strategy for the investors and traders who wants to play safe with their capital. As per this strategy the risk is just of the interest earned amount and the principle amount is safe in your fixed deposits.

NOTE : I donot recommend any strategy , this is just for the education purpose. This is just a way which I too prefer and I am sharing my personal experience in this.

I have created few generator FD's and now instead of directly investing my money into the stock market I will create the FD of that amount and will invest just the interest amount for investment. Each month the investment amount will increase and further when it reaches to a higher amount I may choose to start a small SIP of that amount with the small investment.

I feel this is a way that could work for me to build a portfolio with the small amount and by investing small in the riskier but investing regularly a small amount without hesitating.

I will probably create a FD of 8000 Rs each month and will invest the earned interest of this 8000RS each month in the recursive manner.