3 Reasons to Buy Amazon Stock Before Its Stock Split
Amazon's (NASDAQ: AMZN) stock price has been elevated for some time. It was last under $500 per share in 2015, placing it out of reach of many investors who don't use a brokerage that offers fractional shares. The Motley Fool recommends having 25 stocks in a diversified portfolio, if split evenly this equates to a 4% weighting for each stock within the portfolio. Following that logic, at Amazon's current $2,900 stock price, the portfolio would need to be valued at $72,500 for investors to own just one share of this company.
With Amazon's board of directors announcing a 20-for-1 stock split, the price will drop to a more reasonable $145 per share starting June 6. Now, more investors can purchase the stock without fear of overloading their portfolios. Additionally, the Dow Jones Index is price-weighted, meaning the companies are weighted according to how expensive their shares are. A $2,900 stock price would destroy the balance in the index, but $145 would be par for the course. While I don't know if Amazon will be inducted into this group of 30 companies, the share split is a step in the right direction.
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Source Fool.com
