Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
The Apple earnings call always gets a lot of press. Apple is newsworthy when people expect to hear something new. As usual Apple didn’t disappoint the media. As for shareholders…
Among the big news was a 7 for 1 stock split announcement. What everyone wanted to hear, new product announcements, didn’t happen.
At some point in the near future, Apple’s lofty $569 share price will become $81 in exchange for seven times the amount of outstanding shares. But, are seven $81 shares better than one $568 share of Apple? The market thinks so.
Math tells me different. It’s as if I gave you one whole apple or 4 quarters of an apple. Said another way, I can give you a $20 bill or four $5 bills. Which is better? It’s the same thing.
Except, investors tend to look at stock prices like they’re grocery shopping or buying a TV. That’s the wrong way. But we do it anyways.
Price comparison is a big deal. Give me a list of similar TVs with similar features and I’ll buy the cheaper one. I’ll do the same thing with a gallon of milk. Is a split induced cheaper stock price a reason to buy?
No it’s not.
A stock split waters down the quality of investors. The new, lower priced stock is accessible to more people. You get a short-term pop in price along with more volatility – great for traders, irrelevant for everyone else.
Want proof that current events affect our long-term thinking? A Gallup Poll asked what people thought was the best long-term investment. A portion of the results are below.
You can also see how the stock market crash affected the younger generation – 23% believe savings accounts/CDs are the best long-term investment.