Vanguard stated today that it will declare forward share splits in late April to expand access to three Vanguard ETFs:
- The Vanguard Russell 1000 Value ETF (VONV, CUSIP: 92206C714) will be divided in half.
- The Vanguard Russell 1000 Growth ETF (VONG, CUSIP: 92206C680) will be split four ways for the first time.
The 2-for-1 splits of VONV and VTWO will cut the price per share of each ETF in half while doubling the number of shares outstanding. VONG’s price per share will be lowered in half and the number of shares will be quadrupled as a result of the 4-for-1 split.
April 20 is likely to be the effective date of the split, when the shares will begin trading at their new prices.
“Vanguard carefully analyzes fund health to ensure that funds are performing as intended, are being used responsibly, and are aligned with investor-desired outcomes,” said Kaitlyn Caughlin, head of Vanguard Portfolio Review Department. “Vanguard uses ETF share splits to keep share prices within efficient and accessible trading ranges, which benefits ETF-centric portfolio investors by minimizing uninvested funds in client accounts.”
The splits will have no effect on the total market value of each ETF. The splits will be exempt from taxation. The prices of the three funds’ traditional (non-ETF) mutual fund shares will not be changed.
Our process for share splits
Vanguard conducted a thorough review of various criteria, including market prices, bid-ask spreads, and trading volumes, before deciding to implement forward share splits for the three ETFs. At current time, these three ETFs meet Vanguard’s requirements for conducting a share split.
Advisors should be able to use these ETFs more efficiently as a result of the splits, especially when rebalancing client portfolios.
Vanguard examines its ETFs from time to time to see if the appropriate deployment of share splits might benefit present and potential investors. The April splits will be Vanguard’s first ETF splits since the 1-for-2 reverse split of Vanguard S&P 500 ETF (VOO, CUSIP 922908363) in 2013.
As of December 31, 2020, the three ETFs slated for share splits had a total net asset value of almost $13 billion with expense ratios ranging from 0.08 percent for VONG and VONV to 0.10 percent for VTWO, compared to the industry average of 0.15 percent for general equities ETFs (source: Morningstar, Inc.).
Vanguard is a global leader in the ETF market, with $1.7 trillion in assets under administration, including 81 ETFs based in the United States.
* The share split will affect all shareholders who own shares as of Monday, April 19, 2021, at the conclusion of business. On April 19 and 20, investors will not be able to convert these funds’ mutual fund shares to ETF shares. When trading resumes on April 20, the split-adjusted prices are likely to take effect.
- Obtain a prospectus (or summary prospectus, if available) or contact 800-997-2798 for additional information on Vanguard funds or Vanguard ETFs. The prospectus contains important information such as investment objectives, risks, charges, and expenses; read it carefully before investing.
- Except in very large aggregations worth millions of dollars, Vanguard ETF Shares are not redeemable with the issuing fund. Investors must instead purchase and sell Vanguard ETF Shares on the secondary market and keep them in a brokerage account. The investor may incur brokerage costs as a result of this, as well as paying more than net asset value when purchasing and receiving less than net asset value when selling.
- Investing entails risk, which includes the possibility of losing your money. Diversification does not guarantee a profit or protect you from losing money.
- The prices of mid- and small-cap stocks fluctuate more than the prices of large-cap companies.
- CGS IDs were issued by CUSIP Global Services, which is maintained on behalf of the American Bankers Association by Standard & Poor’s Financial Services, LLC. They are not to be used or disseminated in a way that would make any CUSIP service obsolete. American Bankers Association, CUSIP Database, 2021. The American Bankers Association owns the trademark “CUSIP.”
Is it true that Vanguard splits ETFs?
The Vanguard Group is the most recent exchange-traded fund provider to make this point, announcing plans to divide the share price of three ETFs on April 19 on Tuesday.
Vanguard Russell 1000 Value ETF (VONV) and Vanguard Russell 2000 ETF (VTWO) have both announced a two-for-one share split, while Vanguard Russell 1000 Growth ETF (VONG) has announced a four-for-one split.
While splitting the share price of VONV from the current $131 range to half has no effect on the fund, the fund’s management, or anything else, it is often considered that lower share prices are more tempting to individual investors.
“Vanguard’s head of ETF product management, Rich Powers, said, “We haven’t done this in a while, but share splits do happen regularly to bring the share price for those products down to a more accessible price level.”
Smaller accounts benefit from lower share prices, he noted “Limits the amount of “remaining cash” in a portfolio and makes diversification easier for smaller accounts.
Vanguard rebalances ETFs how often?
Vanguard’s investing success principles include keeping a long-term view and exercising long-term discipline. It’s simple to “set it and forget it,” confident in your long-term investment strategy. It is, nonetheless, worthwhile to check in on your progress from time to time.
Keep an eye on your portfolio after you’ve opened an account and chosen your investments. Compare your present asset mix to your target asset mix once a year. If the difference is greater than 5 percentage points, adjust to get back on track.
Interactive Brokers
Interactive Brokers, which has long been renowned as a high-powered option for professional and active traders, now offers fractional shares, which is a boon to investors who don’t have vast means. On the broker’s Pro platform (cost: $1 or at the broker’s tiered rate), you can buy fractional shares, while trading on the Lite platform is free. The program is only open to equities with an average daily volume of $10 million or a market capitalization of more than $400 million. ETFs and overseas stocks traded as American depositary receipts are also eligible (ADRs).
Robinhood
Robinhood is well-known for its no-commission trading (which also applies to options), but it also allows you to acquire fractions of a share. Yes, you can purchase as little as one millionth of a share of your favorite companies, and you can purchase a wide range of stocks. The program is open to stocks that trade for more than $1 per share and have a market capitalization of more than $25 million, as well as ETFs for fractional shares. Dividends can also be reinvested into fractional shares, but you must first enable the fractional option.
TD Ameritrade
TD Ameritrade doesn’t allow you to buy fractional shares, but that won’t be an issue for much longer now that the broker has been acquired by Charles Schwab. However, the broker will continue to accept new customers until late next year or the next year, when it will be fully integrated into Schwab. Any dividends you receive from TD can be reinvested in fresh shares of that company’s stock. As a result, you can still reinvest your entire income and increase your payout.
More than 5,000 equities, as well as ETFs and mutual funds, are included in the program.
E-Trade
Another broker that has been acquired (by Morgan Stanley) is E-Trade, which is expected to continue operating under its own name. Although the broker does not allow fractional stock transactions, it does allow investors to reinvest dividends into fractional shares. E-Trade will only reinvest dividends in stocks or ETFs that are currently trading at or above $5 per share.
Merrill Edge
Merrill Edge is another broker that permits clients to reinvest dividends in fractional shares, but not directly acquire fractional shares. Dividends from stocks, ETFs, and mutual funds can be reinvested at Merrill Lynch. With an online selection, you can quickly determine whether each security in your portfolio should reinvest, and if you change your mind, you can easily reverse your decision.
Vanguard
Vanguard is well-known for its mutual funds and exchange-traded funds (ETFs), and while you can acquire fractional shares when ordering these securities, that’s the only fractional purchase you’ll be able to make. Vanguard does not enable you to invest in fractional shares of stocks or ETFs, but you can reinvest dividends in stocks, ETFs, and mutual funds. The broker, on the other hand, will not reinvest in low-volume equities, some US stocks, or all international stocks.
What impact do stock splits have on ETFs?
If share prices increase too high for investors to afford or to maintain the fund competitive, ETFs are frequently split. An ETF split is similar to a stock split in that one share is split by a ratio and the shareholder keeps the entire value.
What are the finest exchange-traded funds (ETFs)?
“Start with index ETFs,” suggests Alissa Krasner Maizes, a financial adviser and founder of the financial education website Amplify My Wealth. “They have modest expenses and provide rapid diversity.” Some of the ETFs she recommends could be a suitable fit for a wide range of investors:
Taveras also favors ETFs that track the S&P 500, which represents the largest corporations in the United States, such as:
If you’re interested in areas like technology or healthcare, you can also seek for ETFs that follow a specific sector, according to Taveras. She recommends looking into sector index ETFs like:
ETFs that monitor specific sectors, on average, have higher fees and are more volatile than ETFs that track entire markets.
How long must you keep an ETF before selling it?
If you own ETF shares for less than a year, the increase is considered a short-term capital gain. Long-term capital gain occurs when you hold ETF shares for more than a year.
Do dividends in Vanguard ETFs automatically reinvest?
It’s pre-programmed. You’re buying at different prices and averaging the price per share over time. By regularly adding more shares, you’re compounding the growth of your investment, which will generate dividends of their own.