How to Invest Smartly in Stock Market ?

Here are some tips on how you can make money by investing in Stock Market on a Long Term basis. Personally I have been following these steps to make money.

Firstly, I would like you to learn the terms that follow :

Face Value  

It is the Original Cost of a share that goes on the Certificate.

Bonus Shares

New shares are issued to shareholders in proportion to their holdings.

Dividend

A dividend is a payment made by a corporation or company to its shareholders, usually as a distribution of profits.

Stock Split

A stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur.

Market Capitalization

Market capitalization is the aggregate valuation of the company based on its current share price and the total number of outstanding stocks. It is calculated by multiplying the current market price of the company's share with the total outstanding shares of the company.

How do you benefit from Bonus Shares ?

When a company is running in profit it might offer to its share holders some extra shares in proportion of their current holding. Therefore, you will more shares of that company without having to invest anything extra.

For example you are holding 100 shares of certain company and it declares a 4:1 Bonus then you will receive 100x4 = 400 new shares without investing anything extra.

How do you benefit from Stock Split ?

When a company announces Stock Split the number of shares increases but the market capitalization remains the same. Thus the volume of shares available for trade increase and also the price of share becomes affordable as the face value is reduced.

For example you are holding 100 shares of certain company and it declares a 1:10 Stock Split then you will receive 100x10 = 1000 new shares of Face Value 1/10 without investing anything extra.

How do you benefit from Dividend ?

As a company makes profits it might announce dividends for it share holders from its profits. 

For example you are holding 100 shares of certain company and it declares a 100% Dividend and the Face Value of each share is 10 then you will receive 100x10 = Rs. 1000 on your investment. 

The key to earning from Stock Market is Long Term Investment. Thus, follow the above steps and invest smartly in stock market to make money as you could earn from Dividends, Bonus Shares and Stock Splits year after year.

Also Read :

How to Earn Rs. 500 Crores from Rs. 10000 ?