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What should I do when my stock splits? By The-Adviser.com - |
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Companies generally split stock when the stock has reached a price that individual
investors are often reluctant to buy a full lot or 100 shares because it costs so much.
Corporations generally split their stocks to lower the price and stimulate trading. When a stock is split, there are more shares available but the total market value of the company stays the same. For instance, after a stock splits, if you owned 100 shares of stock at $50 per share you would own 200 shares at $25 per share. In effect, a stock split is no different than getting four quarters for a dollar bill. When your stock splits, you should do the following:
Many academicians believe that there is no fundamental difference between a pre and post split stocks. The reasoning is that the total market value of the company is the same. We believe that stock prices generally rise after a stock splits simply because new investors are attracted to it and are able to make round lot purchases. Click here to learn about our professional money management accounts |
Regardless, of what academicians write and say, we believe that stocks generally rise after a stock split. Got an investment question?
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