Stock Splits

Sometimes you will hear the term Stock Splits.  This occurs when a company thinks their share price is too high to attract more investors.  The company will split the stock to create more shares but the market value remains the same.

Let’s say you own 10 shares of High Five Company with the current price of $40 for a total investment of $400.  The company decides on a 2 for 1 stock split.  You then would own 20 shares of High Five Company with a current price of $20, and your total investment would remain at $400.

Sometimes stock splits can lead to short term gain, but not always.  A company’s fundamentals are what will eventually increase or decrease your investment.