Investment secret

 Hey Folks,

As I have mentioned in the previous blog, I had blogs in the draft so will be sharing them one by one when I get time to work on these drafts. We will see one way to make money through stocks, I have to agree that this is not my own method, I understood this way by following a fellow lady trader.

Ways to make money:

1. Invest in business by having a long-term view.

2. Invest in stocks for other activities to turn them in our favour based on the following events

--> Stock Split.

--> Bonus Stocks

--> Dividend investment.

Stock Split:

This event can happen for any of the following events, to make prices-price affordable for more people, so many can afford it and that in turn bring some money, and provide increased liquidity for a company. This event will not affect fundamentals mostly. This will provide a good chance for an investor to invest money in good stocks or businesses.

I can remember a few recent time splits that happened in the Indian market into companies like Dixon, Jubilant food works (Domino's) and IEX ( Indian Energy Exchange), stock split will also make sure that the stock price of a company is not reduced drastically.

Let us see an example of split Jubilant Food Works announced a split of 1:5 for every one share of jubilant food is going to convert into 5 shares. if we hold 2 shares of jubilant food works.

Share price before split: 4000

Number of shares I hold: 2

Share price after split: 4000/5 as this is a split of 1:5 so I will get 10 shares each worth 800rs after a split. 

I hope this explains the split in plain words please comment if you want any detailed information on this, we can learn together.

Bonus stocks:

This is similar to a Split but in a stock split we divided the same stock price in the case of bonus stocks company will issue bonus shares like 1:2 this means if we hold two-piece of shares we will get one piece of stock for free and the same time, the price of the stock in most of the case it is getting altered or calculated by mean average technique. These bonus stocks help the company to generate liquidity in the market. We can call this bonus shares a free share. similar to BOGO (Buy one and Get One offer).

Advantages of Bonus Stocks:

increase the liquidity of the company

It might help us to earn dividends if the company is providing a good % return in dividend form.

When can the company provide bonus shares:

--> when they are in good profit.

--> They can use that profit for the growth of a company.

-->So it is up to the board of directors or up to the company to provide bonuses or dividends.

Hidden or by-product:

We can all this term called Buy back from the company is kind of by-product between these terms like dividends, split or Bonus. Let me know if we need to cover this in our next blog, I will do it based on the response or request. Companies announce buying back their shares the promoter of the company believes that they have more growth left. 

Example: Recently TCS announced buy back of their shares from the public market.

Now let us jump to the core of this blog called Dividend investing.

Dividend investing: 

Record date: shared should be in Demat account. Let us see how the companies will provide dividends and how it is decided. before we get to move further we need to understand the following terms

1. AGM (Annual General Meeting).

2. EX-date

3. Record Date

4. Eligibility

5. Payout date

AGM  (Annual General Meeting):

AGM meeting is an event where board directors of a company will meet together and present the financials of the company yearly once. And investor gets their chance to raise their questions. Also, they will bring up outcomes like a bonus, buy back or split or dividend in this meeting. Even if an investor missed attending the meeting all investors get a chance to vote on the decisions derived from this meeting mostly investors worry only about our profit investors( I am only talking about me I came to this business only to make money not to listen to others speech :P)

EX-dividend date:

Our positions on the ex-dividend date should be bought completely into our Demat it should not be T+1 or T+2 it should settle in our Demat account. if we exactly buy stocks on Ex-date the seller will be eligible for dividends and we won't get the dividend in most cases.

On This day the stock price adjusts based on the dividend price announced by the company.

So we should know about our broker and whether their settlement process is T+1 or T+2 and act accordingly.

Record date:

On this date, we must complete the T+2 trading days and should have settled in our Demat account. so this can be considered for the dividend and we will get the dividend as announced by the company during their AGM.

In the above days, the company have control only to fix their Record date. The exchange on which that company is trading will decide the EX-Dividend date.

Conclusion:

I hope I have confused enough on the date details (let's move further), on plain words we should buy the stock before the ex-dividend date to make ourselves eligible for dividends. now the big question. why should we confuse this much the trophy here is the small dividend which we are going to get. some people might ask what is a big matter over here.

I know people who have a few lakhs of money in their savings account what is the max interest that we are going to earn is 7%. in case we play this dividend ball game it has two benefits only according to me.

1. Better returns than savings account some times better than FD.

2. It helps us to invest more by getting the money for future money generation.

3. For example Let me take an example of  VEDL (The Vendanta Limited)

4. Invest the returns in other or the same stock

The stock price of that company is trading around 240 and overall last year(2021 refer to the below screenshot) they paid 51r as dividend alone is  21.25 % and we might get this amount in return within a max 45 days. with this money, I get my investment back without affecting its value. the extra 20% I get that directly can go into an investment pocket without doing a much bigger analysis or prediction.

In the above example, we might get 20,000 if we invest one lakh rupees on the stock if it is appreciated in price then that would also be an added benefit of taking this risk. incase if the stock price drops we will end up on the positive side so no loss trade is a good trade according to me. 

The trick here is we need to identify the bigger dividend-paying companies and follow their news to pocket their dividends on time and more importantly the investment capital. The only thing I have to bear is if there is a loss in my invested capital.

All the monetary benefits which are coming from the market will always come up with a certain risk.

All the above said is only based on my experience and assumption I request you to think deeper before executing this plan or discuss it with your financial advisors if you have them. I am sure that I have paved the way so, you can plan accordingly based on your risk appetite.