Stock splits are all the rage this summer with several high-profile companies choosing to execute the move. Nvidia probably attracted the most attention as it was the hottest stock on the market well before its split, but other big names like Chipotle and joined in on the fun.

Why? Stock splits, in this case forward stock splits, happen when a company's share price gets to a level that makes it difficult for a significant portion of the market to buy in. In other words, it's too expensive for the average Joe. The company issues stockholders more stock and proportionally reduces the price at which each share trades.

So in the end, you have more shares, but the total value of all your investments hasn't changed because the shares cost less. However, even though the value in theory doesn't change, more often than not a forward split is followed by positive movement in the stock price. They tend to be good news for investors.

Continue reading

Source Fool.com