Stock Splits: Unpacking the Hype

There’s a lot of buzz around stock splits these days. Nvidia, Walmart, Chipotle – everyone’s talking about it! But, as we explained on the podcast, this isn’t the financial revolution you might think it is.

A stock split is a simple concept: it’s like taking a whole pie and cutting it into more slices. You don’t end up with more pie; you just have more pieces. The same is true with a stock split. You don’t actually increase the value of your investment; you simply have more shares, each with a lower price.

So why do companies do this? Well, it’s all about making their stock more accessible. When a company’s stock price gets very high, it can be difficult for the average investor to buy in. A stock split makes those prices more palatable for folks with smaller portfolios. But let’s be honest, it’s also a bit of a marketing ploy.

Tune into this week’s episode as we answer the question: what does it all mean for you?

Key Takeaways:
-A stock split is like cutting a pie into more slices; it doesn’t change the size of the pie, just how it’s divided.
-Stock splits don’t increase the value of your investment.
-Companies do stock splits to make their stock more accessible and increase trading volume.
-Stock splits don’t guarantee future success.
-Focus on the fundamentals of a company, not just the hype around a split.
-Stock splits can offer an opportunity to buy into a good company at a more affordable price, but they’re just a piece of the puzzle.
-Consider your investment goals and risk tolerance when evaluating a stock split.

About the Hosts:
Julien and Kiersten Saunders are the hosts of the rich & REGULAR® podcast. New episodes are published weekly on YouTube, Apple Podcasts, Spotify and other streaming platforms. Julien and Kiersten are also the authors of Cashing Out: Win The Wealth Game By Walking Away, named 2023 best overall book about investing by Business Insider and one of the best personal finance books by Forbes. To learn more and purchase the book, visit https://richandregular.com/cashingout/

To contact us, send an email to hello@richandregular.com

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Chapters

00:00 Introduction and Shoutout
03:11 How Stock Splits work
05:56 Chipotle’s CFO on why they did a stock spilt
09:12 Stock Splits help make company stock more accessible for employees
11:00 Stock splits as a way to attract more retail investors
12:57 Stock splits do not change the underlying fundamentals of a company
15:11 What companies are hoping to achieve through a stock split
17:00 Investor psychology impact on stock split outcomes (speculation vs. fundamentals)
20:27 Does it make sense to buy after a stock split?
21:11 Assessing your decision based on your investment goals
23:20 Different strategies for short-term vs. long-term investors
24:06 The Risks and Considerations of Individual Stock Investing
27:17 Investing in Stock Splits: A Balanced Approach
28:38 Closing Remarks and begging for reviews again!

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