I understand that stock splits are meant to make stocks more affordable for more investors but if platforms allow fractional shares like Robinhood, does this matter as much? If theoretically more platforms supported fractional shares, would stock splits matter less and less?
In: Economics
My understanding and I am sure I may be wrong but….
Fractional shares are more of an investment through a company that owns the whole stock. This would be like a stock costs $100 but you only have $50, I have the other $50 so we both own half a share. You are limited to what you can do with this share because I need to agree to sell so you can make your money liquid again. For the large firms like Charles Schwabb etc this may be less of a concern as there are likely always someone wanting to sell.
Stock Splits are exactly what it sounds like. It takes a $100 share and makes it into two separate $50 shares so you can buy and own it completely. Therefore not needing a larger firm to split the costs and you are more free to do with it what you want.
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