24 March 2017

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An Illustrated Example on How to Become Wealthy by Investing in Stocks

stock investing
People have lots of doubts on how to make money from stock markets or investing in stocks. Some people are very pessimistic on how long term investments in a company making them rich. Here is an example of how money growing fast to make the investor multi-millionaire with the help of time and power of compounding. Read the below example to know more about that. This would also give you an idea when you see similar examples in newspapers or magazines.   

Here is the story how Rs. 10000 invested in Wipro in the year of 1980 because Rs. 598 cr…!

Suppose you have purchased 100 shares of Wipro on 1980 at face value of 100, with an initial investments of Rs. 10000. In the year of 1981, Wipro declared a 1:1 bonus. Now you had 200 shares in your hand.

In 1985, the company declared another 1:1 bonus to make your total number of shares as 400.

In 1986, company split the shares in a 1:10 ratio and thus you have 4000 shares in hand.

1n 1987, the company declared another bonus of 1:1 ratio. Thus the total number of shares now grown to 8000. Again in 1989 company declared another 1:1 bonus and the number of shares in your hand grown to 16,000.

In 1992, company declared 1:1 bonus that again helped the number of shares in your hand reach to a total of 32,000. In 1995, the company declared a 1:1 bonus, that made your total shares now 64,000.

In 1997, company declared a bonus of 2 per share. You now held 192,000 shares. In 1999, company split the share to Rs.2. Which means your one share became 5 shares. Thus the total shares now in your hand is 960,00 nos.

In 2004 company again declared 2:1 bonus. This makes you to had 2,880,000 shares. In 2005, company declared 1:1 bonus. Now the total shares in your hand is 5,760,000 shares.

In 2010, company declared 2:3 bonus and you now had 9,600,000 shares. With the current market prices of Rs. 500 per share, the shares in your hand values Rs. 480 crores.

In the past 33 years, the company regularly paid out dividends and increased them almost every year. Cumulatively, you had received another 118 crores only as dividends for this time period of 33 years! Thus by investing just Rs. 10,000, the person gained 598 crores.

This is the example on how long term investments in fundamentally strong companies making you millionaire or billionaire. You have lots of such examples in this kind and from various places.

Note: If you are still pessimistic or just cannot believe the fact, just search the term “Wipro Dividend History” and “Wipro Bonus History” in Google and calculate the above mentioned details yourself.