If anyone doesn't know what it is split Shares, this is when the company, listed on the stock exchange decreases / increases the value of its shares, adjusting their number accordingly. The most common split 2:1. For example, shares were worth 100 Dollars, and on the day of the split, the cost is halved to 50 Dollars, but on the other hand, the number of shares on the owner's brokerage account doubles. This procedure, practically, is no different from paying dividends, only much more profitable, As when dividends are paid stock falls on 1-10%, and at the splits of 50%, but in fact these are dividends of 100%, because -50% this +100%, viewed from below. What's better, Dividends 1-10% or dividends 100%? Any dividend investor, without even using a calculator, will answer that the second option is incomparably better than the first.
We trade split-tickers FOR DUMMIES
Split tickers – It's a stock, which have been divided into smaller parts. This is done in order to, to make stocks more accessible to investors with less capital.
Split Ticker Trading Can Be Profitable, But there are some things, Important Things to Know, Before you begin.
What Are Split Tickers??
Split tickers – It's a stock, which have been divided into smaller parts. This is done in order to, to make stocks more accessible to investors with less capital.
For example, if the share is worth 100 Dollars, And it is divided in the ratio of 2 to 1, then after the split, each share will be worth 50 Dollars.
How to Trade Split Tickers?
Split-ticker trading is similar to trading regular stocks. You can buy and sell them on the exchange, using a broker.
However, there are some things, Important Things to Know, Before you begin.
Impact of the Split on the Stock Price
After the split, the stock price, usually, decreases in the ratio of, in which it was divided. For example, if the stock is divided in the ratio of 2 to 1, then its price after the split will be reduced by 50%.
However, this is not always the case. In some cases, the stock price may rise after a split. This is happening, If investors believe, that the promotion has become more affordable and therefore more attractive to buy.
How to Trade Split Tickers for Profit
There are several ways to trade split tickers for profit. One of the methods – It is to use the split as an opportunity to buy shares at a lower price.
A different way – It is to use the split as a signal to sell the stock. If you think, that the stock price will go down after the split, you can sell it, before it falls.
Split Tickers for Dummies
If you're new to stock trading, then you should first familiarize yourself with the basics of trading common stocks. After that, How You'll Learn the Basics, You can start trading split tickers.
Here are some tips for trading split tickers for dummies:
- Start With Small Capital. Split tickers can be riskier, than regular stocks, Therefore, it is important to start with a small capital, that you can afford to lose.
- Research the company, shares of which you want to buy. Before, How to Buy Stocks, It is important to research the company, To make sure, that it is a good investment.
- Take your time. Don't buy or sell stocks just because of a split. Please wait, until prices calm down, before making any decisions.
Split tickers can be a lucrative way to invest, But it's important to know the risks, Before you begin.
But some meticulous and distrustful investors will surely wonder — where are the dividends themselves? When split, they are not paid through 25 days after split to brokerage account. Yes, really, you always have to question everything. Let's compare the dividend strategy and splits.
Let's admit, we have on the account 1000 Shares. The action is worth 100 Dollars. Total, the trader's balance or capital is 1 000 * 100 = 100 000 Dollars
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- In case of dividends 5%, on the day of the cut-off, the share price falls to 95 Dollars, capital decreased to 95 000, but through 25 days to the account we will receive 5 000 dollars in the form of dividends and capital will recover to the previous 100 000. (for simplicity, let's say that the share price remains at the same level). You can buy with this money 52 promotions for 95 dollars and there will still be 60 Dollars. Total, total capital will be (1052 Shares * $95) + $60 = $100 000
- In case of split 2:1, on the day of the split, the share price will drop to 50, but the number of shares will increase to 2000. And the capital will remain the same 50 * 2 000 = 100 000. Now, by analogy with dividends, we sell 1000 shares on 50 and we believe that these are our dividends. We deduce these 50 000 from a brokerage account and put it under the pillow on 25 days (similar to the dividend strategy). After that we start our, as if, dividends back to the brokerage account and we can buy 1000 shares on 50. We are reinvesting, so to speak, Dividends. Total, total capital will become $50 * 2 000 = $100 000. That is, exactly the same as in the dividend strategy — stayed with their. Main, keep money under the pillow in this strategy 25 days, and that, if this condition is not met, the result may be different.
Means, as a result, as in the dividend strategy, and in the split got the same result. But what is the plus of the split over dividends? The plus is that in the second case, much more dividends were received than in the first. 100% dividend is cool.
Skeptics, for sure, will use their penultimate trump card on the dividend gap, which will close someday, then the profit will be made. I will answer this — imagine what will happen when the split gap closes…. it will be something :)
And the last trump card of the skeptics — pier, they say that before the dividend cut, the share price rises, we will answer with a phrase from an anecdote ” and you speak”…. Before the split, the price also rises :)
All in all, Summarizing, we invest in splits and we don’t know grief.
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