Vanguard to Split Three ETFs

By Sun

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)

vti.png

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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ETF, Investing

5 Responses to “Vanguard to Split Three ETFs”

  1. Four Pillars |  Jun 06, 2008 at 1:15 am

    I think VTI (which I own) is around $150?

    The only advantage I can think of is that if the price is lower, it is easier to buy round numbers or board lots which might result in a slightly better price for the buyer.

    Or maybe it’s just marketing. :)

    Mike

  2. mh1 |  Jun 06, 2008 at 9:57 am

    ShareBuilder, while not the greatest broker in the world, will allow one to buy partial shares of ETFs.

  3. Sun |  Jun 10, 2008 at 9:41 pm

    The price of VTI showing in the picture may not be accurate because I probably didn’t place the cursor at the end of the curve :)

    Yes, a lower price could make buying round number of shares easier, even with small money. That could increase trading volume since more people can buy the shares without having to “save” money. Eventually, the split could increase market shares of VTI. And yes, it’s all marketing!

    ShareBuilder does allow partial shares, but somehow I think their commission is too high. And with ShareBuilder what investors do isn’t really “trading.”