Is There Any Magic In An ETF Share Split?

When a share split among stocks and the exchange traded funds (ETFs) which hold them occurs, are investors any better off?

Earlier this month, Vanguard declared a 2-for-1 split of three ETFs in an attempt to bring down their prices. The ETFs are:

• Vanguard Emerging Markets (VWO)
• Vanguard Total Stock Market (VTI)
• Vanguard Extended Market (VXF)

For background, most stocks and ETFs like to trade under $100 to keep their attractiveness and affordability to individual investors, reports Tim Middleton for ETF Insider. VWO was trading above that price before the split.

Among investors, a split is a sign of success. But that’s it. The rest is all a function of accounting. If a $100 stock splits 2-for-1, investors simply get twice as many shares, each worth only half as much. Or in mathematical terms, the value of your holdings divided by the number of shares outstanding, is the total value you actually own. Nothing changes in value and you do not actually gain anything for free, as it may be easy to assume.

Middleton notes that about 58 ETFs currently trade for more than $100.

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