Bonus Shares and Stock Splits Overview

Study Notes

Bonus shares are free additional shares given to existing shareholders.
They are issued from the company's retained earnings or reserves, not from new capital.
Companies issue bonus shares to increase the number of shares outstanding, making them more affordable for smaller investors.
They can boost investor confidence and liquidity, improving the company's image in the market.
Reliance Industries issued a bonus share in 2020, giving shareholders one bonus share for every one share held.

A stock split divides existing shares into smaller units, increasing the number of shares outstanding but reducing the price per share.
This makes the stock more affordable and accessible for smaller investors, potentially increasing trading volume.
A stock split can improve liquidity, making it easier for investors to buy and sell shares.
Apple Inc. announced a 4-for-1 stock split in 2020, giving shareholders three additional shares for every one share held.

Bonus shares are free, while stock splits involve dividing existing shares.
Bonus shares increase the number of shares outstanding without affecting the company's capital or the total value of the company.
Stock splits increase the number of shares outstanding and decrease the price per share, but the total market capitalization remains the same.

Market trends refer to the general direction of the market, which can be upwards (bull market), downwards (bear market), or sideways (ranging market).
Understanding market trends can help investors make informed decisions about buying and selling securities.

Bull Market: Characterized by rising prices, investor optimism, and strong economic growth
Bear Market: Characterized by falling prices, investor pessimism, and economic recession.
Ranging Market: Characterized by fluctuating prices within a defined range, indicating uncertainty and a lack of a clear direction.

Economic conditions, including inflation, interest rates, and employment.
Geopolitical events, including wars, natural disasters, and political instability.
Industry trends, such as technological advancements, regulatory changes and consumer demand.
Investor sentiment, including fear, greed, and risk appetite.

Technical Analysis: Using charts and indicators to identify patterns and predict future price movements.
Fundamental Analysis: Examining a company's financial statements, management, and competitive landscape.
Market Indicators: Economic data, such as the Consumer Price Index (CPI) and unemployment figures.

A short-term decline of 10% or more in the stock market, typically caused by investor overreaction to negative news.

A sharp and sudden decline in the stock market, typically characterized by widespread panic and fear.

Day Trading: Buying and selling securities within the same trading day, aiming to profit from short-term price fluctuations.
Swing Trading: Holding securities for a few days to a few weeks, aiming to capitalize on price swings caused by market trends.
Scalping: Making a series of small trades to profit from minor price movements and quick exits.
Position Trading: Holding securities for a longer period, aiming to profit from long-term market trends.