Vanguard to Split Three ETFs

I often heard of stock splits, but this is the first time I learned splits of shares of exchanged-traded funds (anybody else has done that already?). Of course, since ETFs are traded just like stocks, the split shouldn’t be a surprise at all.

Mutual fund giant Vanguard, which is also becoming a major player in ETF, announced yesterday that it plans to make a 2-1 split on three of its most popular ETFs on June 17:

• Vanguard Total Stock Market (VTI)
• Vanguard Emerging Markets (VWO)
• Vanguard Extended Market (VXF)

The reason for the split is to make these funds, which are all traded above $100 now, “more affordable” for small investors. The splits will cut the price of each of the three ETFs in half, so investors with small funds can buy more shares, one way to attract more investors.

Then again, ETFs are actually mutual funds, but I never heard of mutual fund splits. The reason for that is, as I can think of, that we can buy fractional shares of a mutual fund. If I only have $50, then I can buy 0.5 shares of a fund. That’s not the case for ETFs, though.

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