The large-cap (AVLFX) AIM Value fund will split its shares 3 for 1 on Nov. 10, AIM Funds announced Thursday.
That means the broker-sold funds' shareholders will get three shares for every one they own at the close of business that day. The move, which isn't a taxable event, won't raise or diminish the value of a shareholder's investment in the fund because the fund's net asset value, or share price, will be divided by three accordingly.
Although some investors might avoid funds with a high share price -- the fund's Class A shares closed at $42.62 on Wednesday -- a fund's share price is neither inherently positive nor negative. A fund's price is based on the underlying value of the stocks in the fund's portfolio. In other words, no matter what a fund's share price, a dollar invested will get the same return.
While some in the industry would agree that a share price above $20 can discourage investors, it's a tough case to make. The $105.6 billion (VFINX) Vanguard 500 Index fund, the largest fund in the nation, had a $126 share price as of Wednesday's close.Although splits for shares of a company's stock don't have any bearing on a company's actual value either, the argument for stock-share splits is better: Since stocks often have to be bought in round lots, reducing a stock's share price makes it more accessible to modest investors. But this argument doesn't work for funds, where investors buy dollar amounts, not blocks of shares. See this Dear Dagen column,