So I woke up this morning around 6 AM, and started getting ready for work: take a shower, get dressed, grab breakfast, check stocks.  It was the same as any other weekday morning… until I checked my retirement portfolio.  I’ve been a little busy these past few days and haven’t had the opportunity to check my portfolio.  Imagine my surprise when I see that my Roth IRA account had gone up 25%!!  My heart immediately started pounding faster.   Flashes of luxury cars, beach houses and private jets raced through my mind.  And then back to reality.  How could the bank make such a gross error?  What happened?  Well, upon further scrutiny, I found out that my Vanguard Total Market ETF (VTI, which surprising makes up 25% of my Roth IRA) had doubled in price.  I immediately went to google and searched for an explanation.  It turns out, three of Vanguard’s ETFs were being split.  Twice as many shares had been added to accounts yesterday, and the price was to be reduced in half at market open today.  Darn.

What exactly is a split and why would stocks/ETFs want to do that?  Well a split is exactly what it sounds like.  It’s decreasing the price of an investment while increasing the shares (A 2:1 split would be double the shares at half the price).  A lot of companies will split their stock as a psychological move.  If the price appears cheaper, then more investors may see it as a value investment.  For ETFs however, price is not driven by speculation but it merely represents the market that it tracks.  However, a split can increase the trading volume of an ETF which in turn correlates to its liquidity.  

Bottom Line:  I will not be checking my portfolio tomorrow…