Why Stock Splits Won't Make You Rich

Stock splits sound exciting, but here's the truth about what they really mean.

Some people still believe stock splits are a surefire way to make money.

When a stock like Super Micro Computer, Inc. (SMCI) does a 10-for-1 split like it did yesterday, some investors get dollar signs in their eyes.

They assume lower share prices mean more profits.

But here’s the truth: buying after a stock split is not a winning strategy.

First, let’s get clear on what a stock split actually is. When a company splits its stock, it increases the number of shares available—but the value of each share is reduced proportionally.

For example, SMCI 0.00%↑ was trading at $416 before the split. After the 10-for-1 split, the price dropped to $41.60, but shareholders got 10 shares for every 1 they previously owned.

So while you hold more shares, your overall investment value doesn’t change. You didn’t suddenly make more money—it’s the same pie, just cut into smaller pieces.

And here’s something many people miss: the tradable "float" (the number of shares available for trading) also increases, but that doesn’t change the company’s value or your ownership stake. More shares, yes, but no extra value.

So why do companies do stock splits?

It’s mostly about optics and accessibility. A lower share price makes the stock seem more affordable to smaller investors. It also boosts liquidity, meaning more shares are being bought and sold, making it easier to trade. In the case of options, splits can make contracts cheaper and markets tighter.

But does this mean the stock will shoot up after a split? Not necessarily.

Splits sometimes create short-term excitement. More people might buy in, thinking the stock is "cheaper," even though nothing fundamental has changed. But this hype doesn’t last, and more often than not, the stock returns to moving based on actual performance, not its post-split price.

Look at the numbers: Apple's stock, for example, went up about 10% in the 12 months after its splits. Sounds good, right? But when you compare it to random 12-month periods over its history, Apple performed even better, with gains averaging 38%.

In other words, stock splits aren’t some magic formula for profit.

You’re better off focusing on strategies that work consistently, like identifying reliable, repeatable patterns.

If stock splits were a guaranteed way to make money, you'd see every trader jumping in. But you don’t. Why? Because the real players know stock splits are mostly noise.

So next time you hear about a stock split, remember: it doesn’t change the value of the company, and it’s certainly not a shortcut to making money.

Trade smart,

Josh Belanger