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What are Bonus Shares and their Advantages?

07 Sep 2023

The satisfaction derived from earning a bonus or something for free is great. Bonus shares, like their name, suggests, allow for just that. By creating a free online Demat account , you too can generate bonus shares that maximize your earnings. After all, Demat accounts allow for investing and trading decisions to be made from the comfort of one’s home.

What are Bonus Shares?

Bonus Shares DefinitionBonus shares may be defined as the additional shares provided by a company to pre-existing shareholders based on the number of shares presently owned by them. These shares are issued to said shareholders without them having to incur any additional costs.

Free Demat account creation is possible online and could provide you too, with the potential to incur bonus shares during your investment journey.

Why are Bonus Shares Issued by a Company?

A company may choose to provide pre-existing shareholders with bonus shares in the event that it isn’t able to pay dividends to them owing to a shortfall of funds despite incurring profits during this time. Also known as the capitalization of profits, bonus shares are allocated from the profits of the company in question.

Advantages of Bonus Shares –

Bonus shares provide their investors with several benefits some of which have been mentioned below.

  • Bonus shares provide investors with additional shares which increase their investments in the company and thereby increase the liquidity of the stock.
  • Those who avail of bonus shares are not hankered down by any tax implications as there are none.
  • They are particularly advantageous for those looking to make long-term investments as it allows returns to be amplified on a broader spectrum.
  • When dividends are issued by the company in question, those who own bonus shares are given a greater dividend as they now own a greater number of shares in the company.
  • They instill in investors a greater sense of faith in the company as it ordinarily uses cash in order to expand and grow.

Conclusion -

Open a free Demat account today such that you can start investing and trading on the stock markets and ultimately get bonus shares! It is important to do due diligence prior to making any buy, sell or hold decisions pertaining to securities  you might have your eye on. This preliminary research can reduce the potential of your incurring any risks and / or losses and can potentially allow you to accrue greater returns. Now that you have a better understanding of what bonus shares are, you can look at market conditions, your financial goals and assess your risk tolerance prior to attempting to benefit from bonus shares. That being said, bonus shares are known for the ample number of advantages they provide and stockholders should be excited to avail of them.

Related Blogs : What Is Bonus Share: Eligibility Criteria & Benefits | How does a company choose between a bonus and stop split


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