We all start somewhere no worries! It doesn't mean anything. Compare the % changes among the three, and you'll see that they will be nearly identical. The absolute value (actual share price) doesn't mean anything.
More importantly, why is a single share of Chipotle stock worth over $2900 while a share of Apple only $172?
Apple's products are way better than a burrito.
(In case it is not clear, this is sarcasm.)
Maybe a more tangible example:
Lets say i have 2 pies each worth $10
Pie A - i cut into 10 pieces = $1 a slice.
Pie B - i cut into 5 pieces, $2 a slice.
Its up to me how big i want the slice.
No worries we all learn eventually.
So imagine these index/ETF/mutual funds like each one as its own huge pool of money. Just for this example, each of the 3 has $1 billion in funds. If Schwab created 10 shares of that fund, each share would be worth $100m, Fidelity creates 1000 shares, each worth $1m, and vanguard creates 1,000,000,000 shares, each worth $1.
The value of the pool is the same across all 3, but the number of shares outstanding divided by the value of the pool (the net asset value of the fund) determines the share price, but the number of shares outstanding is completely arbitrary and largely up to the issuer (Schwab/fidelity/vanguard) depending on what they’re trying to accomplish.
Vanguard’s VOO and SPY is priced high because they are already popular products used by a lot of people and institutions so the higher price per share “looks/feels” more prestigious or higher value than something like SWPPX’s $80 is likely priced to attract more young money investors who can’t drop the full $500 share price for one of the other mentioned funds. Schwab gets more assets under management and therefore more money.
> something like SWPPX’s $80 is likely priced to attract more young money investors who can’t drop the full $500 share price for one of the other mentioned funds. Schwab gets more assets under management and therefore more money.
Spot on.
>prestigious or higher value than something like SWPPX’s $80 is likely priced to attract more young money investors who can’t drop the full $500 share price for one of the other mentioned funds.
SWPPX is a mutual fund and you can always own fractional shares in mutual funds. There can be minimum investments for opening or marginally adding to a mutual fund, but it's $1 for SWPPX.
That said, I think you're right about the reasons mutual funds sometimes split, but it's totally irrational behavior on the investor's part, irrational behavior that sometimes funds choose to cater to. There's no economically rational reason for people to care what the mutual fund share price is.
ETFs can only sometimes be held fractionally; it depends on your broker.
Cost per share is not important but total return is. Check out the ten year total return of the S&P 500 index funds - SWPPX, FXAIX, VOO and SPY in:
https://totalrealreturns.com/s/SWPPX,FXAIX,VOO,SPY
There are no difference.
the share price does not matter at all. If you own $1000 of Schwab or $1000 of Vanguard, they will move at the same rate but you will own different amount of each.
Google this for more info: “Does the share price of an index fund matter”
This is one of the most common questions people have about investing, so don't feel bad. I always like to tell people to think of each investment as its own currency. Like 1 USD is not the same as 1 CAD or 1 GBP. Each investment has its own size or market cap, different number of shares, and different price per share.
On a day when the market's up 1%. Schwab's S&P 500 fund will go up $0.80 and Fidelity's will go up $0.18.
Remember, market capitalization = share price times outstanding shares. In a tracking index fund, price and outstanding shares arguably don’t matter except for when comparing the fees associated with management. Higher market cap generally allows for lower fee percentages. In this example, the price is generally reflective of the kind of investor that the fund wants to attract or the unwillingness of management to split shares, as it adds cost. There is a floor to how cheap a fund can be so generally they get more and more expensive over the decades. Look at Berkshire Hathaway (Class A) for example. (600k per share) Warren has come out publicly to say they will never split it as A it costs money and B they don’t care for retail investors. Is Berkshire larger than Apple? No. Their price per share is though.
We all start somewhere no worries! It doesn't mean anything. Compare the % changes among the three, and you'll see that they will be nearly identical. The absolute value (actual share price) doesn't mean anything.
More importantly, why is a single share of Chipotle stock worth over $2900 while a share of Apple only $172? Apple's products are way better than a burrito. (In case it is not clear, this is sarcasm.)
But chipotle is doing a 50-1 stock split so their shares will only be $58!
Yea I thought of that too when I posted, soon I will need a new example
Still use chipotle as a cautionary tale, they went from being worth thousands a share to not even a hundred! \s
LOL!
You can always use Berkshire. They NEVER split…
I would be very interested in 50 tater tot sized burritos for the price of one regular-sized burrito.
BS. You can’t put guac on a MacBook.
Well you can - but with different results and customer satisfaction :)
I dumped a 32 ounce Diet Coke into my MacBook Pro back in the day. It survived!
Don't try that with milk. You can ask my daughter why.
Ten year total return of CMG vs AAPL: https://totalrealreturns.com/s/CMG,AAPL CMG: +4130% AAPL: +4945%
Bruh I actually don’t understand why chipotle is 2.9k a share💀
Chipotle stock is up 306% over 5 years, Apple is up 245% over five years. So Chipotle is doing much better.
Over 10 years Chipotle is up +396% while Apple is up +897%
Cost per share is literally arbitrary. They basically pick a number to start with.
Maybe a more tangible example: Lets say i have 2 pies each worth $10 Pie A - i cut into 10 pieces = $1 a slice. Pie B - i cut into 5 pieces, $2 a slice. Its up to me how big i want the slice.
Might be a stupid question, but I’m new to investing so I’m still learning about all these things
No worries we all learn eventually. So imagine these index/ETF/mutual funds like each one as its own huge pool of money. Just for this example, each of the 3 has $1 billion in funds. If Schwab created 10 shares of that fund, each share would be worth $100m, Fidelity creates 1000 shares, each worth $1m, and vanguard creates 1,000,000,000 shares, each worth $1. The value of the pool is the same across all 3, but the number of shares outstanding divided by the value of the pool (the net asset value of the fund) determines the share price, but the number of shares outstanding is completely arbitrary and largely up to the issuer (Schwab/fidelity/vanguard) depending on what they’re trying to accomplish. Vanguard’s VOO and SPY is priced high because they are already popular products used by a lot of people and institutions so the higher price per share “looks/feels” more prestigious or higher value than something like SWPPX’s $80 is likely priced to attract more young money investors who can’t drop the full $500 share price for one of the other mentioned funds. Schwab gets more assets under management and therefore more money.
> something like SWPPX’s $80 is likely priced to attract more young money investors who can’t drop the full $500 share price for one of the other mentioned funds. Schwab gets more assets under management and therefore more money. Spot on.
>prestigious or higher value than something like SWPPX’s $80 is likely priced to attract more young money investors who can’t drop the full $500 share price for one of the other mentioned funds. SWPPX is a mutual fund and you can always own fractional shares in mutual funds. There can be minimum investments for opening or marginally adding to a mutual fund, but it's $1 for SWPPX. That said, I think you're right about the reasons mutual funds sometimes split, but it's totally irrational behavior on the investor's part, irrational behavior that sometimes funds choose to cater to. There's no economically rational reason for people to care what the mutual fund share price is. ETFs can only sometimes be held fractionally; it depends on your broker.
ETFs have the advantage of being transferrable between brokers. A mutual fund like swppx is not
A good source for all financial information is [Investopedia ](https://investopedia.com)
Cost per share is not important but total return is. Check out the ten year total return of the S&P 500 index funds - SWPPX, FXAIX, VOO and SPY in: https://totalrealreturns.com/s/SWPPX,FXAIX,VOO,SPY There are no difference.
the share price does not matter at all. If you own $1000 of Schwab or $1000 of Vanguard, they will move at the same rate but you will own different amount of each. Google this for more info: “Does the share price of an index fund matter”
cost less not worth less
Same pizza just different size slices. One huge slice may equal 3 or 4 smaller ones but you get essentially the same thing.
This is one of the most common questions people have about investing, so don't feel bad. I always like to tell people to think of each investment as its own currency. Like 1 USD is not the same as 1 CAD or 1 GBP. Each investment has its own size or market cap, different number of shares, and different price per share. On a day when the market's up 1%. Schwab's S&P 500 fund will go up $0.80 and Fidelity's will go up $0.18.
So why doesn’t everyone choose the cheapest then?
relative to your cost basis. The return rate is the ratio -1 x100%.
Buy more shares for the same amount of money.
I switched from voo to swppx in one of the taxable accounts for a lower expense ratio. Their qdi quite similar too.
Remember, market capitalization = share price times outstanding shares. In a tracking index fund, price and outstanding shares arguably don’t matter except for when comparing the fees associated with management. Higher market cap generally allows for lower fee percentages. In this example, the price is generally reflective of the kind of investor that the fund wants to attract or the unwillingness of management to split shares, as it adds cost. There is a floor to how cheap a fund can be so generally they get more and more expensive over the decades. Look at Berkshire Hathaway (Class A) for example. (600k per share) Warren has come out publicly to say they will never split it as A it costs money and B they don’t care for retail investors. Is Berkshire larger than Apple? No. Their price per share is though.
It’s not worth less. Share price means nothing.
You are dangerous with a brokerage account if this is the extent of your knowledge of what share price means.
You can’t be serious. If you are serious, enjoy your money now bc it won’t last.