Bonus Shares

 

INTRODUCTION:

There are several ways to earn money from stock market like intraday in cash & FNO, short term holding and long term holding. In short term earning is through price fluctuation but in long term earning is through Price appreciation and in addition to that Dividend, Bonus, Splits and Right issues also help to increase our investment in multiples.

Today we are going to learn about the Bonus Shares in this article.

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What is Bonus Shares? Impact of Bonus Shares on Price?

Bonus shares are free shares which we get without any additional cost, in proportion of shares we are holding in our demat account and ratio is decided by the company management.

E.g - You are holding 100 shares of Company ABC CMP @ $100 and bonus decided by Company management is 1:1, then you will have 100 + 100 * 1/1 = 100 + 100 = 200 shares now in your demat account. And in addition to that the impact on price, price will decrease to that ratio, means now new price will be  now $50.

Share Qty Before Vs After Bonus Share Issue

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Why Bonus Shares Issued? Advantage of Bonus Shares?

Bonus Shares are free shares issued to the share holder as a reward for their investment in company. And advantages, it give firm belief for long term holding and growth of company, liquidity in stock and increase in issued share capital.

How we can get Bonus Shares?

As we know that to buy a share of any company we need to pay money for that share, incase of bonus shares we don't need to pay money to get that shares. But for getting bonus share first we need to  purchase that share and have a holding of that share in our demat account. And after declaration of Bonus shares by any company in whatever ratio, we will get that Bonus shares.

Magic of Bonus Shares:

Magic of Bonus Shares we will see through a example (Example is only for understanding and learning purpose only)

Example 1 : Share bought only once and kept in holding for 10 Yrs.

3 Times Bonus in 10 Yrs

Only 100 Shares purchased at the start of 1st yr and after 3 time Bonus it become 800 Shares at the end of 10 Yrs.

Example 2 : Share bought every year and kept in hold for 10 Yrs.

3 Times Bonus in 10 Yrs

Every year 100 Shares purchased at the start of Yr and after 3 time Bonus it become 3600 Shares at the end of 10 Yrs.

There are several shares in Indian stock market which gives consistently bonus to their stock holder as reward for long term investment and belief on them.

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Conclusion :

There in no why to become rich with short cut in stock market. But definitely have a big chance to become rich in long term if the investment is done in proper analytical why through proper planning and long term horizon. Then there is big chance of converting small investment into big return. 

Hence friends don't follow shortcuts do proper research for your investment and hold it for long term.

Disclaimer : This article is only for information and knowledge share and not for any type of recommendation for investment. Do your own analysis before investment.

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