stock split
A corporate action that increases the number of shares outstanding by issuing more shares to existing shareholders in a fixed ratio, reducing the share price proportionally.
Example
“Apple did a 4-for-1 stock split in 2020 — shareholders received 4 shares for each 1 they owned, with the price divided by 4.”
Memory Tip
STOCK SPLIT = more shares, lower price, same total value. Like cutting a pizza into more slices.
Why It Matters
Stock splits affect how you view your investment portfolio value and can influence trading decisions. Understanding splits helps you recognize that a lower share price does not mean your investment has lost value, and it can make shares more accessible to new investors.
Common Misconception
Many people believe that a stock split increases the total value of their investment or makes them richer. In reality, a split only changes the number of shares and the price per share proportionally, leaving your total investment value unchanged.
In Practice
If you own 100 shares of a company trading at $120 per share worth $12,000 total, and the company announces a 2-for-1 stock split, you will then own 200 shares at $60 per share, still worth $12,000. Your ownership percentage remains exactly the same, but the lower share price may attract more retail investors.
Etymology
STOCK (shares) SPLIT (divided into more pieces). The stock is SPLIT into more shares at a lower price.
Common Misspellings
Track markets & get real-time stock data
Related Terms
More in markets
Other markets terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.