How Does the Vanguard 2 for 1 Split Impact My Portfolio?
Vanguard announced on February 22, 2023, that they had a series of funds splitting. The share splitting became effective on March 14th, 2023. The one that affects us and our clients the most is the small-cap fund that is splitting.
What does this mean to shareholders who own this fund?
Shareholders who own stock or an ETF will have their stock split in two. For every share that a shareholder owns, now they’ll own two, but in total, they still have the same value.
The reason companies will do this, or in this case, an ETF Vanguard as a sponsor is doing it is generally simply because they want to affect the price in such a way that they lower the price per share of the stock and thereby making it more convenient, and easier to purchase an individual share.
Whereas prior to this, the VIOO, which is the Vanguard S&P 600 small-cap fund price was somewhere around $170 per share. After the shares were split the approximate value is o $85. With this, a person can buy one share of the vanguard small-cap, the S&P 600 ETF for half the price it used to be and still get the full intensification of the fund itself. Ultimately, stock splitting just makes the stock or the ETF more affordable, it has no bearing on the total value.
Any price increase that may or may not happen after a stock split has nothing to do with the fact that it’s split. Additionally, it’s important to add that this is a nontaxable event, there are no taxable consequences to receiving those “additional” shares because the value overall of your account will not change.
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Casey Smith
President, Wiser Wealth Management
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