A stock split is like when a company decides to take karate lessons and karate chop or ‘split’ their stock prices.
Let’s use a block of chocolate for example. One block normally sells for $12. But when the company decides to do a stock split, they karate chop all their blocks of chocolate into four smaller, individually wrapped pieces selling at $3 each. At the end of the day, you still need the same amount of money to buy a full block of chocolate, but the bite-sized treats are a tasty inclusion to a kid’s party bag. Companies use stock splits to make it easier for new investors to buy shares and get in on the chocolatey action. It also gives companies a bump in the market. It’s like when you walk past a shop with bright yellow ‘SALE’ sign. You take notice of the shop. Companies on the stock market hope you’ll take note of their company too. Stock splits are still whole shares, unlike fractional shares which are 50% or even 25% of a full share.
Tips and tricks
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