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Stock splits, in essence, are non-events. It is analgous to choosing between a pizza cut into 8 pieces versus one cut into 4 pieces. You would have the same amount of pizza, just larger or smaller shares of it. When a company like JDS-Uniphase announces a 2-for-1 stock split, they are just cutting each of the four pieces of the pizza in half. Or in their case, each of the millions of outstanding shares of stock. The share price will fall by 50% to compensate for the doubling of the number of shares.

That said, you can argue that there are effects of a stock split. Companies split their stock knowing that their stock will seem more affordable for investors. It is human nature to think that a $25 stock is cheaper than a $125 stock. For grins, check out a stock that NEVER has split, Berkshire Hathaway (BRK.A), which as I write is quoted at $70,900 per share, which is down from the high this year of $81,100 per share.

Often, upon announcement of an upcoming split, you will see a short-term run-up in stock price. Then when the split happens, the price comes down again. My advice is to ignore the split, except to enjoy owning twice as many shares as you bought. In general, just be assured that it is a positive sign that a company is splitting their stock - it is evidence that you own a growing company with an increasing share price.

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