This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Do Mutual Funds Ever Split Their Shares?

The net asset value for the (FHLSX) fund is close to $60. Do mutual funds ever consider stock splits? Are they even an option with mutual funds?

-- Michael Micciche


You could call a share split, like a name change, a cosmetic surgery procedure for the mutual fund industry.

Share splits can and do happen in the world of mutual funds. But they don't occur very often and are virtually meaningless exercises for shareholders.

A share split has no economic effect on a fund's shares. It just doubles, triples or quadruples the number of shares, thereby lowering the net asset value, or NAV. A fund's NAV, the dollar value of a single share, is based on the value of all the fund's holdings divided by the number of shares outstanding. By increasing the number of shares, a firm lowers a fund's NAV.

When a publicly traded company splits its stock, the maneuver may produce a spike in the stock's price if the market views it as a positive signal by the company. But the market does not directly influence the pricing of a mutual fund's NAV. If your fund completes a 2-for-1 split of its shares, you might wind up with double the number of shares. But your account's value will not change, and there aren't any tax implications.

"The only reason to do a share split is for marketing purposes," says Pamela Wilson, a senior partner at Hale and Dorr in Boston. For example, a fund with a rather lofty NAV may be off-putting to investors, particularly novice mutual fund shoppers. An abnormally high NAV may make some investors uncomfortable. In the eyes of some, lofty NAV equals expensive. A share split will simply render a more palatable, digestible number, says Wilson. That's why you will see many new funds launch at a starting NAV of about $10.

A fund company might split a fund's shares if its NAV is higher than those for the rest of the family, making for easier comparisons. Wilson says she sees it happen when a fund company wants to reduce the high NAV on an older fund to bring it in line with a group of new funds.

Here's a real-world example. In late 1997, AIM Management split the shares of five funds the firm had inherited from its sister company Invesco earlier that year. The five Invesco funds had been around for a long time, and all had NAVs of $60 or more, says an AIM spokesman. Fund shareholders received three additional shares for every share they owned in one of the funds. The lower, more familiar NAVs made the funds easier to market and were more in line with the other AIM funds, the spokesman says.

By the way, Invesco says it has no plans to split the shares of the Health Sciences fund.

When it comes down to it, the only thing that really matters is how much money you make in the fund and how little you have to give up to taxes.

Send your questions to , and please include your full name.

TSC Fund Forum aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.02 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
TSLA $162.60 0.00%
YHOO $27.97 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs