When a company splits its stock, its total value doesn’t change; it just ends up with more stocks, each at a cheaper cost.
Here’s a food metaphor: If you ask the guy at the pizzeria to cut each slice in your large pie in half, you’ll still go home with the same amount of pizza. You just have more, smaller slices now.
Companies typically say they’re splitting their stocks to make them affordable to more people.
But, is that reality? It’s more of a way to grab headlines and bring in money, said certified financial planner Douglas Boneparth, founder and president of Bone Fide Wealth in New York.
“This was done as a marketing tool to get smaller investors to invest in the stock,” Boneparth said. “The actual mechanics of the company are the same.”
And therefore, so are your chances of making a profit on either Tesla or Apple, experts say.
“People ultimately want to know, ‘What does this mean for my bottom line?’” Boneparth said. “The answer is: nothing.”
If you own Apple in an index fund, for example, it’s as if you had a dollar that just turned into four quarters, Boneparth said.
Source: CNBC
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