What Is A Stock Split?

When you’re looking for a team of legal and financial advisors Rockville MD residents trust, look elsewhere. Many terms and phrases in the investing industry can be complicated for novice investors, and it’s important that people feel confident in the financial management services financial advisors provide. Stock splits are just one type of financial management process seen by many legal and financial advisors Rockville MD has to offer.

First, what is a stock split? A stock split is an event in which a publicly traded company gives its shareholders additional shares, and at the same time it adjusts the price of those shares so that the total market value of the company remains the same. Effectively, this means that, if you own one share of a company worth $10, after a stock split you will own two shares worth $5 each.

As a top team of experienced legal and financial advisors Rockville MD trusts might explain, a stock split does not directly affect the value of your initial investment.

Maintaining Overall Market Value

The purpose of a stock split, therefore, might seem confusing. Stock splits do not impact investment values that have already been made; instead, a stock split allows a company to adjust the values of its stocks to be more in line with its competitors. Stocks could be divided in many ways but they are often split in halves or in thirds.

A company usually executes a stock split when their share prices increase to levels that are too far above that of their competitors. By splitting the stock, the company maintains its overall market value while making investments in individual shares more attractive for the average investor.

This process often results in greater market activity, as an experienced team of legal and financial advisors Rockville MD can provide might know. It can also lead to an increase in stock value for current shareholders (although this is not guaranteed).

Increased Market Activity

When a company splits its stock, the resulting increase in shares often leads to increased market activity: more people often end up buying and selling the stock. As more investors get involved, especially the average investor trying to invest for retirement, the stock price often rises.

The overall value of the company might also rise as well, due to increased market activity. This would likely benefit investors, including investors who have continuously had a stake in the company before and after the stock split. As any experienced legal and financial advisors in Rockville MD might attest, market fluctuations are not always easy to predict; however, a change like a stock split is often a good sign that the company’s value will increase slightly, even if only temporarily.

Contact a Team of Rockville MD Wealth Advisers

The financial industry can be confusing. It’s important for individuals to feel confident in the team of legal and financial advisers they’ve chosen to help manage finances.

Taking advantage of stock splits is just one of the many opportunities that we can offer to help boost your portfolio. For more information about stock splits, speak with a competent team of legal and financial advisors Rockville MD trusts.