Tuesday, October 13, 2020

More Stock Splits? Yes or No?

 In August we saw both Apple and Tesla make  the news with stock splits. I for one used the opportunity to add some Apple to my portfolio.

I have been an investor in Apple for over ten years, and have a nice holding. I do not hold any Tesla stock itself but am sure there is some of its stock in a Mutual Fund or two which I own=

AAt the time I went onto Quora and asked the question, Should other higher priced companies offer stock splits too. You can read the answers here.


Most of the answers said that stock splits are no more than smoke and mirrors. They mean nothing and merely dilute share holder equity.


I do not agree totally with these answers. Stock splits may not be logical. They may not be  creating more wealth. After all a $100 bill can be split many ways; two $50's, Five $20' etc. But you still only have $100 in your pocket.


What the answers miss out on is the psychology of the human mind. Where I had one of something, I have two, four or seven. That means I have more. Don't I?


Think in terms of marketing. How often do you see an advertisement for a sale, it offers you 50% savings if you buy today. Many people rush to buy without thinking.


But stop and think. You could save 100%  of the price. By not buying at all.


Humans work on emotion, not mathematical logic. I like Home Depot stock at #300, it is a nice buy, but I would rather buy three for #100 each. I would have more.  Foolish I know, but it is how the average human works.


You may also say, well with fractional shares you can buy the $100 of Home Depot. Ah. But. Then I would only have one third of a share. Not much good for my ego. Boasting at the office about my portfolio of fractional shares.


As an investor I want to be able to boast. Tell the world and his dog about how successful a stock picker I am. Stock splits help me do that. Successful companies can split their stock, not infinitely but on occasion and I can see my portfolio grow. 


A win, win situation don't you think? 


If you have enjoyed this post and you would like to leave me a tip, please consider following my Amazon Affiliate link below and making a purchase from Amazon. You need not buy one of the selected books, you may buy any item from Amazon. If your purchase is a qualifying purchase, Amazon will pay me a small commission for sending you to their website.


As a blind writer every tip helps me make a living and lots of you have already shown your support for my work. Thank you for supporting me. 

My Amazon Affiliate Link

No comments:

Post a Comment