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Financial Advisor Gaithersburg MD: What is a Stock Split?

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What is a Stock Split?

Our financial advisors can lead you in the right direction for investing in your future today! First, what is a stock split? A stock split is an event in which a publicly traded company gives its shareholders additional shares, and at the same time adjusting the price so that the total market value of the company remains the same. Effectively, this means that, if you own one share of a company worth $10, after a stock split you will own two shares worth $5 each. A stock split does not directly affect the value of your initial investment.

Maintain Overall Market Value

A company usually executes a stock split when their share prices increase to levels that are too far above that of their competitors. By splitting the stock, the company maintains their overall market value, while making investments in individual shares more attractive for the average investor. This, in turn, often results in greater market activity, and an increase in the value of the stock. Your financial advisor can provide additional insight to this.

Increased Market Activity

When a company splits its stock, the resulting increase in shares often leads to increased market activity; more people buying and selling the stock. As more investors get involved, especially the average investor trying to invest for retirement, the stock price often rises, along with the overall value of the company.

Taking advantage of stock splits is just one of the many opportunities that we can offer to help boost your portfolio. If you need more information about stock splits, contact CIC Wealth today; our financial advisors are here to help.