Should You buy a stock before it splits?
Should you buy a stock before or after it splits, it depends upon your reason for buying the stock. You do get at least one advantage: you can raise cash easily after a split and keep most of your position. Another advantage: you can add to your position at a lower per-share cost.
If you are just wanting to trade the split runs up for swing trading profits, then buying the stock well ahead of the split date is one swing-style strategy.
If you want to buy the stock as a long-term investment, then waiting a few days or a week after the split will tend to be a better price. Some stocks continue to rise after a stock split but most drop a few points after the split due to pre-split traders moving prices up ahead of the split and then selling on the split date or a day before the split date.
A stock split also helps to attract investors by making a share more affordable. It is important to note that only the price per share is going down as the number of outstanding shares are increasing due to the split, the valuation of the company, and market capitalization are still the same.
