Nvidia has announced a share split. Here’s Why Investors Shouldn’t Care | Personal finance
With a four-to-one stock split, investors in the company end up owning four shares for every share they owned prior to the split. But the real value of their investment has not increased despite the number of shares. Think of it this way: if you have a piece of pie and cut it into four pieces, you’re out of pie.
Stock splits reduce the impact of stock splits
Now companies sometimes split their stocks in hopes of stimulating demand, as more people can theoretically afford to buy stocks that cost $ 200 each instead of $ 800. Some investors also perceive a stock that costs $ 200 a share to be “cheaper” than a stock that costs $ 800, although this is not a good way to assess whether a company’s stock is worth their money. price.
Still, the drop in the price per share can sometimes have a short-term impact on the share price because the company’s shares seem more accessible. However, thanks to fractional shares, it is less and less likely that a split will even have this effect.
You see, fractional shares allow anyone to buy fractional shares, or partial shares, even if they don’t have enough investment capital to buy a full share. Someone with only $ 200 no longer has to wait for Nvidia to split up to buy a stake in the company. Instead, brokers who allow fractional shares allow any investor, even those with a few dollars, to specify how much they want to invest. This means that someone with $ 200 could buy 1/4 of a share today if they wanted to.