I have 2 Cr in FD? Should I keep it there or is there any other avenue I should explore?

Should You Keep Your 2 Crore in Fixed Deposits? Here's a Smarter Alternative

When it comes to investing your hard-earned capital, Fixed Deposits (FDs) are often considered a safe and reliable option. However, with growing inflation rates and low returns, you may be wondering if there are better alternatives to FDs that can offer more growth potential, diversification, and regular passive income. If you have 2 Crore in Fixed Deposits (FD), here’s a strategy I’ve been using for the past 5 years to achieve better capital growth while generating monthly income.

Step 1: Diversifying Your 2 Crore Investment

Instead of keeping all your money in an FD, consider diversifying it across various asset classes to achieve better growth and manage risk. Here's how you can distribute your 2 Crore:

• 40 Lakh in Nifty Bees (Nifty 50 ETF): This provides exposure to top-performing companies in India, offering growth potential.
• 20 Lakh in Bank Bees (Banking Sector ETF): This will diversify your portfolio by focusing on India’s banking sector, known for steady growth.
• 10 Lakh in Midcap 150 Bees (Mid-cap ETF): Midcap stocks can offer higher returns, though they come with higher risk, helping balance your portfolio.
• 10 Lakh in Junior Bees (Small-cap ETF): Small-cap stocks have the potential for high returns, ideal for risk-tolerant investors.
• 40 Lakh in Gilt Fund (Govt Bonds): A safer, low-risk investment in government bonds, providing stability to your overall portfolio.
• 20 Lakh in Gold Bees (Gold ETF): Gold acts as a hedge against inflation and market volatility, ensuring wealth preservation.
• 20 Lakh in Liquid Bees (Liquid ETF): Liquid ETFs provide low-risk returns and help with liquidity for emergencies or short-term opportunities.
• 40 Lakh in Cash: Keeping this portion in cash allows you to have funds ready for emergencies or future investment opportunities.

By diversifying across these asset classes, you’re effectively creating an all-weather portfolio that’s designed to provide growth while managing risk.

Step 2: Pledging Securities for Margin and Generating Passive Income

Once your 2 Crore is diversified as per the above allocation, the next step is to use margin trading to generate passive income. Here's how:

1. Pledge the Securities: Pledge the securities (total worth 1.6 Crore) bought through your broker. By doing this, you can borrow money from the broker (usually up to 90% of the value pledged).

2. Generate Passive Income: In this case, you can borrow 1.44 Crore (90% of 1.6 Crore) and combine it with your 40 Lakh in cash, making a total of 1.84 Crore.

3. Option Strategies for Monthly Income: Use conservative option strategies to target around 1.5% returns per month. With a total of 1.84 Crore, this translates into generating 2.5 Lakh to 2.7 Lakh per month in passive income.

This strategy allows you to have a reliable monthly income while retaining your capital growth potential through your diversified portfolio.

How to Use This Income Effectively

You can either withdraw part of the income for your expenses or retain it in your account to continue growing your overall portfolio. The choice is yours, but by managing both growth and income, you’re building a solid financial foundation for the future.

Conclusion: A Balanced Approach to Capital Growth and Passive Income

While Fixed Deposits are a safe investment, they offer limited returns. By diversifying your capital across ETFs, bonds, and margin trading, you can potentially enjoy better returns, more diversification, and a steady passive income stream. This strategy has worked for me over the last 5 years, and it could be an effective way for you to make your 2 Crore work harder for you.