BPCL recently announced a 1:1 bonus share issue. I expected to receive an additional share as a bonus, but I noticed that my shares were merely split with no change in value. Why is this termed a ‘bonus issue’ when there is no value addition for investors? – Dr. P.Shankar, Hyderabad
Bonus shares represent the capitalization of retained earnings or reserves. While the immediate value remains unchanged, bonus issues indicate the company’s financial strength and positive growth outlook. This method of rewarding shareholders differs from dividend payments. When companies issue bonus shares, it would generally lower the market price per share, as more shares come into supply, promote liquidity in the secondary market, improve retail investor participation.
I am approaching retirement and expect to receive Rs. 20 lakhs as retirement benefits. With minimal pension income expected, what investment strategy would you recommend for generating regular monthly returns? – Jayasree, Chennai
Consider implementing Systematic Withdrawal Plans (SWPs) through mutual funds. We recommend you invest in fixed income/debt mutual funds where currently the yields range between 6.8% to 7.2%. When withdrawing, it would be prudent to consider leaving some portion of the yield as margin of safety. You may consider a withdrawal rate of 6.5% per annum, with approximate monthly withdrawal of Rs.10,700. Note: Fund yields and maturity periods are subject to market conditions. Verify current rates before making investment decisions.
I have been investing in the stock market but new to trading. Recently I read an article on Gold ETF Could you explain the effective trading strategies for Gold ETFs, including associated charges, fees, taxes, and key considerations? – Sreekumar, Bengaluru
Gold Exchange Traded Funds (ETFs) are mutual funds that invest in gold. Gold ETFs trade in the cash market segment of the Exchange, like any other company stock They offer several advantages like lower expenses compared to physical gold investments, no entry or exit loads however standard brokerage fees apply. ETFs are exempt from Value Added Tax and Securities Transaction Tax and are subject only to applicable capital gains tax (shortterm/long-term).
As a recently retired private sector employee, can I invest my retirement benefits as a lump sum in my NPS account to qualify for the pension scheme? Additionally, I have heard that NPS accounts with less than Rs. 2 lakhs can be fully withdrawn at age 60. – Vipin Choudhary, Mumbai
You can invest in a NPS account, and there is no limit upper limit on investment amounts. After investing, you can choose from various pension/annuity plans offered by service providers empanelled with the NPS system. Regarding withdrawals, the rules are structured based on both age and corpus amount. If you have not yet reached 60 years of age and your total corpus is Rs. 2.5 lakh or less, you are eligible for complete withdrawal. Similarly, upon reaching 60 years of age, if your total NPS corpus is Rs. 5 lakh or less, you can opt for complete withdrawal. This provides flexibility while ensuring retirement security through structured withdrawal options.
