Wednesday, 21 October, 2009

Accumulate Free Shares

Accumulate Free Shares
Simple means to get rich

I've reproduced excerpts of an email that I got from one of the many forwards that I keep receiving. Unfortunately, while the stuff is interesting, the original source is unknown.

Am quite sure that all of us would have come across quite a few such stories in India about guys who invested in Hind Lever, TISCO, Infosys, Reliance, etc.

I've modified the system suggested in that mail and refined it with my own suggestions - this involves something wonderful, and almost incredible - Accumulation of Free Shares!!!

Key steps to get rich - without much efforts - over a period of a decade or beyond:

  1. Identify companies with a track record of consistently paying dividend for over 5 years - preferably over 10 years from the major indices - like Sensex, Nifty, BSE 500, Nifty Junior, etc. - Folks who pay dividend must be profitable, must be generating cash flows, must be bothered about rewarding shareholders, must be having a reasonable degree of managerial integrity. In a nutshell, these chaps must be decent blokes, and their scrips warrant taking a look for investing (y)our hard-earned money.
  2. Identify a relatively "disposable" sum of money - let's say, 15 days salary per company as an initial investment - Let's say, Rs. 25000/=, for convenience of calculation and allocate it as "Reserved for Company ABC"
  3. Identify the broad PE range within which the company moves over an extended period of 5 years or more
  4. Wait patiently till it reaches the lower end of the PE range referred to above (Very likely to happen at least once a year for each company)
  5. Buy for Rs. 25000/=, as mentioned in point 2 above at the current PE (let's say, at a PE level of around 12). If the share price of company ABC is Rs. 100, you'll have around 250 shares now.
  6. Wait patiently till Company ABC reaches the upper end of the PE range referred to in point 3 above (Let's say, at a PE level of around 20)
  7. The price of Company ABC would have gone up a bit faster and a bit more than the rise in PE - because along with the increase in PE, the EPS would have also gone up due to the passage of time.
  8. Hence, when the PE goes up from 12 to 20, the probability is high that the share price of Company ABC would have almost doubled to around Rs. 200
  9. Sell shares worth Rs. 25000/= - Now, after selling around 125 shares of Company ABC @ Rs. 200/= per share, you'll have around 125 shares of Company ABC, virtually free of cost. All further dividends from this Company ABC will also be completely free income for you - not merely tax-free income!
  10. Repeat the steps from Point 4 to Point 9 repeatedly for Company ABC.
  11. Repeat steps from Point 2 to Point 10 regularly for each of the other companies that you've identified from Point 1 above

Over a period of 3 years, you'll be surprised at the results.

Over a longer period of time, you'll stop looking at this blog because you'll be freaking out at the beaches of Florida during summer and enjoying the concerts of Sudha Raghunathan in December at Chennai!



Source unknown - got through email - Original Source unknown:

Simple means to get rich 

Let's say you had picked up 160 shares of Pepsi in 1980.

It would have cost you $4,000.

However, that amount would have automatically grown to over $300,000 by 2004, without you investing another penny. Not bad?

Now let's try the same with Philip Morris... starting with the same dollar amount, which would have amounted to 58 shares. By the time you'd finished, your $4,000 would have ballooned to nearly $600,000... and over 4,300 shares.

Without you putting in an extra nickel.

Here's another one. Say you put $5,000 into a company called Terra Nitrogen in 2003. That's 1,136 shares at the then-price of $4.40 per share. Today the share price has exploded to $110 per share. Pretty good. But the "Plan B Pension" income on top of that could have exploded your $5,000 into $151,026 in just five years.

Like I said, it's an almost perfect self-growing cycle.

Like a tree that waters and fertilizes itself.

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