Knowledge Base

Why Has My Average Price Decreased After a Stock Split?

A stock split increases the number of shares you own while reducing the price per share proportionally, without affecting the total value of your holdings. For example, in a 2-for-1 stock split, you’ll have double the shares, but each share’s price will be halved. This results in a lower average price per share, but your overall investment value remains the same. The decrease reflects the split’s effect on the share price, not a change in the company’s value.

How Does the Split Ratio Work?

The split ratio determines how many new shares you’ll receive for each share you currently own. For example, in a 2-for-1 stock split, you’ll get two new shares for every share you hold, effectively doubling your share count while halving the share price. Similarly, in a 3-for-1 split, you’d receive three shares for each existing share. The ratio adjusts the price accordingly, but the total value of your investment remains the same. Understanding the split ratio helps you gauge how a stock split affects your holdings.

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