Fidelity Fund Share Splits to Occur on May 11, 2018

Download Q&A on Fidelity Mutual Fund Share Splitspdficon_small

Fidelity is conducting share splits on five funds on May 11 and on another 10 funds on June 8. Similar to stocks, mutual funds can (though less often do) split their shares. It’s important to note that neither kind of share split carries tax implications for investors or changes the underlying value of the shares you own.

However, a share split may be part of a marketing-driven effort to make a popular fund whose net asset value (NAV) has grown significantly look cheaper. In a two-for-one split, for example, the number of shares double while the price of the shares is cut in half. I would argue that such a move could impact investor behavior, since it feels good to buy a popular fund at what appears to be a lower price.

In light of this, I will be carefully watching the inflows of the mutual funds undergoing share splits. If the desired increase in investor momentum comes to fruition, then the flow of money going into the fund could become a distraction for the funds’ managers. That said, no manager I recommend hasn’t already had to contend with both inflow and outflow issues over his or her tenure.

I will cover the share splits in greater detail in the Inside Scoop section of your June issue. For a complete list of Fidelity funds scheduled to undergo share splits, please see the Mutual Fund Share Splits Q&A I’ve posted to the site.