Secret of 20% risk free returns!

Financial sense is about common sense. Trying to identify where one can make money without losing sleep over it and not taking too much risk. Of course, with higher risk comes higher rewards, but what would you do if I could get you 20% annual return with no risk? I mean, we always hear that the equity market long term return rate would be 20%, but that comes with risk.

Somehow i get the feeling that you are now getting interested !

I am talking about employee stock options . Not the ones that you get in terms of awards, but a lot of companies ( like mine) have schemes going where you can buy company shares at a discount of 15% to the market.

What usually happens is that you keep accumulating a certain part of your salary with the company, and once in 6 months , the company uses the amount accumulated by people who wanted to participate in the scheme to buy shares in the open market on their behalf. These shares are immediately transferred to the employees account on the same day.
Since there is no requirement that you keep the shares for a certain period of time, you can sell of the shares the same day itself. Which means a neat 15% capital gains in your pocket. Repeat the process twice a year and you have made yourself a pre tax profit of 30% on the amount invested!! Not bad for a return.

Of course , if your company is not listed in India, you will need to pay taxes on this- which is upto the tax bracket you are in- which is 30%. Hence the post tax return is 20%!!

Risk free!!

This month my company launched this program for employees and i decided to participate in this program. I will ensure that i sell of my shares ,unless i am expecting a big jump in the share price of my company, the day i receive my shares and pocket a neat 15% !

I know this sounds simple, but man, its taken me 2 years to understand this and execute it . But it made so much sense that i decided to write about it and share my thoughts with my readers.

This is actually a neat trade, with min to zero risk.

Dont miss the bus- find out what your company offers.

Happy Investing - I know i am going to laugh my way to the bank in this case!

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