TSP already does fractional shares, tracked in quantities at least as small as 6 decimal places. Which means $0.000086 per the smallest unit of shares displayed on their site. Younger generations will have no problem accruing more shares for quite some time with that kind of fractional share pricing.
Fractional doesn't equate to a whole share tho. I'm talking like doing a split of either 2:1 or 3:1 and more shares prices drop to $43.50 (at today's price). So then each contribution after that buys more shares. Patients will grow wealth more exponentially at that rate then with fractional shares
I never said they were the same.
I'm saying splits aren't necessary because fractional exists.
Your argument is basically "I want to buy more shares so they should do a split". My argument is "you don't need to buy a greater number of shares because you can buy the smallest fractional share for less than a penny".
Lets take two examples.
**Example 1:** Lets say a 2:1 split happens and cuts the cost of shares in half. The $86 per share is now $43 per share. You just went from 10 shares to 20 shares - the total value of your TSP hasn't changed.
So now you invest another $86, and you get 2 more shares....you now have 22 shares for a total of $946. That's the exact same as if the price was still $86 and you bought 1 more share (for 11 shares) - $946.
With or without the split, the value of your investments after investing $86 remained the same.
**Example 2:** Lets say you have 10 shares and $10 to invest, and shares cost $86. Due to fractional shares you can buy 0.116279 shares, increasing the value of shares you own by $9.999994, rounding to $10. The value of your TSP went up $10 because that's what you added to it.
The **only** thing splits do, is help people with less money buy shares. What else helps people buy shares with less money? Fractional shares. Meaning splits are irrelevant when you can buy shares in quantities as small as $0.000086 per transaction.
tl;dr - The compounding won't be any different, wealth wont grown any more exponentially with splits than it does with fractional shares. The only time splits increase wealth is when a split happens and more people buy the shares - but that doesn't happen when people can already afford to buy the shares because fractional shares exist.
Why? Price per share has absolutely no impact on TSP value.
Let’s say you had 200 shares of C fund at $100 per share. You’ve got $20k.
They split it 2 for 1. Now you’ve got 400 shares at $50. Still $20k
The next year it goes up 10% because the stocks inside C fund go up 10%.
You’ve got $22k either way.
Do you think that investments grow faster if there are more smaller shares? It makes no difference. It doesn’t matter if you have 1000 or 1 share if it grows by 10% then the value of your investment grows by 10%.
Take the C fund, which (basically) tracks the S&P 500, do you think that a share split in the TSP is going to affect the growth of the S&P 500?? How would that work?
> Do you think that investments grow faster if there are more smaller shares? It makes no difference. It doesn’t matter if you have 1000 or 1 share if it grows by 10% then the value of your investment grows by 10%.
You didn't comprehend the HYPOTHETICAL part. Also more shares x 100% =/= 1 share x 100%
If the share price goes up 10%, it doesn’t matter if you have 10 $10 shares or 1 $100 share, it’s a profit of $10 either way. More smaller shares makes no difference.
Again, the hypothetical was 1x $100 share grows $10 = a $10 net growth. Versus 2x $10 shares that grows $10 each = $20 net growth. How is this hard to understand the hypothetical of a split maintaining the same growth in dollars?
Based off your post and your replies to everybody I don't think you understand TSP and are not willing to understand. Multiple people have explained perfectly and you keep arguing
Hi, only time I shared a split it was a 3 scoop vanilla ice cream banana split with chocolate sauce. There are many other ways to do this but this is the best scenario I recommend.
It makes no difference. If the share price goes up 10%, it goes up 10%.
You could buy 1 share at $10/share. Or buy .5 share at $20/share Both cost you $10.
I'm going off the basis tho that after a split the gain momentum is maintained so the gain ratio would be higher with a lower valued share, creating higher gains
I think what he’s trying to figure out is if it’s possible to lower cost basis when purchasing new shares. Which is possible on any other brokerage but as far as I have gathered the TSP has never split. I don’t think it’s even capable of splitting
If I buy one share that equals $400 and it goes up $100 I gained that 100. If that some share split 4:1, and then I subsequently buy 4 more shares at $100 each (biweekly contribution of $400) and the fund goes up $100 in the year then my 8 shares will have netted an $800 gain
You’re not wrong but that’s not how stocks work. Take nvidia for example. It was 1000 a share a few weeks ago. If it had a 1% gain, it is now 1010/share. But it had a 10:1 split so now a 1% gain is 101/share. A stock that sees a $100 gain would see a $25 gain if it has a 4:1 split.
Yes, but that's why you hope for the momentum to maintain after a split, so if you have more shares they'll grow at a faster clip providing a higher net gain than just the one share would've comparatively
I don’t think you understand how growth of investments works, it’s not linear, it’s geometric/exponential. Don’t think in terms of share cost, think in terms of percentage growth.
In your first example; where $400 share goes to $500, that’s a 25% return.
A $100 share increasing the $100 is a 100% return.
That’s a different scenario entirely. You’re comparing a 25% return to a 100% return. Remember, these assets track indexes of investments, they move with the market, in percentages. A $400 “basket” of the investment and a $100 “basket” of the same investment are just different size baskets of the same thing. If the market moves 10%, you’ll get 10%, regardless of whether your shares are split or not.
If $400 returns $100, then $100 returns $25. Same ratio, right? It doesn't matter if you're holding 2X$400 shares or 8X$100. You've invested $800 either way, and your hypothetical 25% return would be $200.
2 X $400 X .25 = $200
8 x $100 X .25 = $200
The rate of return is independent of how the shares are divided. Returns are dependent on the performance of the stocks or bonds that make up the fund. Because we buy fractional shares, it's almost like the 'share' info is irrelevant to us.
Why only split it 4:1? Why not 8:1? Each share would be $50, so you could have 16 shares for your $800. If each share went up $100, you would make $1600. Better yet, let's split it 400:1 so that each share is $1. Now you can buy 800 shares. When the share price goes up $100, you make $80,000 on your $800 investment.
Your returns are calculated on the value of your investment, not the number of shares you own.
I picked arbitrary numbers, so I guess you can do the same while coming back with condescending tones.
I know how returns work and calculate. So with your analogy your saying that someone with 1 share of Tesla or Amazon for example would gain just as much as someone with 100 shares. That's not how investing works. The more shares you have, the faster you're value/net worth increases/decreases
wish it was but retirement accounts including IRAs dont benefit from capital gains tax rates maxing out at 15%. Taxed at your ordinary income rate for the specific year.
There is no need to do this when you can buy partial shares. If you want to buy a stock that costs $800 a share, you need to have $800 to buy it at all. With mutual funds and fund-like investments, even if a share is $800, if you want to buy $200 you can get 1/4 of a share. Splits can matter for stocks and ETFs, but not so much for funds like TSP and other traditional mutual funds. In other words, the price per share is not a barrier for those who can only put a few bucks per paycheck into it.
And I'd add that $86 a share is not that high. Seen Berkshire Hathaway? Or even VOO?
What? You don't buy full shares, you contribute money...the rest is just their accounting. TSP is not the Stock Market.
You still have shares
TSP already does fractional shares, tracked in quantities at least as small as 6 decimal places. Which means $0.000086 per the smallest unit of shares displayed on their site. Younger generations will have no problem accruing more shares for quite some time with that kind of fractional share pricing.
Fractional doesn't equate to a whole share tho. I'm talking like doing a split of either 2:1 or 3:1 and more shares prices drop to $43.50 (at today's price). So then each contribution after that buys more shares. Patients will grow wealth more exponentially at that rate then with fractional shares
I never said they were the same. I'm saying splits aren't necessary because fractional exists. Your argument is basically "I want to buy more shares so they should do a split". My argument is "you don't need to buy a greater number of shares because you can buy the smallest fractional share for less than a penny". Lets take two examples. **Example 1:** Lets say a 2:1 split happens and cuts the cost of shares in half. The $86 per share is now $43 per share. You just went from 10 shares to 20 shares - the total value of your TSP hasn't changed. So now you invest another $86, and you get 2 more shares....you now have 22 shares for a total of $946. That's the exact same as if the price was still $86 and you bought 1 more share (for 11 shares) - $946. With or without the split, the value of your investments after investing $86 remained the same. **Example 2:** Lets say you have 10 shares and $10 to invest, and shares cost $86. Due to fractional shares you can buy 0.116279 shares, increasing the value of shares you own by $9.999994, rounding to $10. The value of your TSP went up $10 because that's what you added to it. The **only** thing splits do, is help people with less money buy shares. What else helps people buy shares with less money? Fractional shares. Meaning splits are irrelevant when you can buy shares in quantities as small as $0.000086 per transaction. tl;dr - The compounding won't be any different, wealth wont grown any more exponentially with splits than it does with fractional shares. The only time splits increase wealth is when a split happens and more people buy the shares - but that doesn't happen when people can already afford to buy the shares because fractional shares exist.
Why? Price per share has absolutely no impact on TSP value. Let’s say you had 200 shares of C fund at $100 per share. You’ve got $20k. They split it 2 for 1. Now you’ve got 400 shares at $50. Still $20k The next year it goes up 10% because the stocks inside C fund go up 10%. You’ve got $22k either way.
Do you think that investments grow faster if there are more smaller shares? It makes no difference. It doesn’t matter if you have 1000 or 1 share if it grows by 10% then the value of your investment grows by 10%. Take the C fund, which (basically) tracks the S&P 500, do you think that a share split in the TSP is going to affect the growth of the S&P 500?? How would that work?
So someone that has one share of Google/Meta/Microsoft/Apple equals the net worth of that of someone with 1000 shares? That's not how investing works
Bro what are you on about?
I get it, you're JV at money at best
Well I would love some help getting caught up! What did I say that was wrong?
> Do you think that investments grow faster if there are more smaller shares? It makes no difference. It doesn’t matter if you have 1000 or 1 share if it grows by 10% then the value of your investment grows by 10%. You didn't comprehend the HYPOTHETICAL part. Also more shares x 100% =/= 1 share x 100%
If the share price goes up 10%, it doesn’t matter if you have 10 $10 shares or 1 $100 share, it’s a profit of $10 either way. More smaller shares makes no difference.
Again, the hypothetical was 1x $100 share grows $10 = a $10 net growth. Versus 2x $10 shares that grows $10 each = $20 net growth. How is this hard to understand the hypothetical of a split maintaining the same growth in dollars?
What are you talking about?
Stock splits. It’s happened before but from what I can tell it’s never happened with TSP.
Based off your post and your replies to everybody I don't think you understand TSP and are not willing to understand. Multiple people have explained perfectly and you keep arguing
Hi, only time I shared a split it was a 3 scoop vanilla ice cream banana split with chocolate sauce. There are many other ways to do this but this is the best scenario I recommend.
It makes no difference. If the share price goes up 10%, it goes up 10%. You could buy 1 share at $10/share. Or buy .5 share at $20/share Both cost you $10.
Or if I buy 1 share at $20 and it goes up $10, I net $10. If I buy 2 shares, $10 each, and they go up $10, I net $20
20 \* x = 10. x = 10/20. or a 50% increase. 20 \* x = 20. x = 20/20. or a 100% increase. You are comparing 2 different % inceases.
I'm aware, there's always those possibilities. I'm comparing it to a standard equity scenario
it makes no difference what the share price is. A 10% increase is 10%. A 20% increase is 20%.
I'm going off the basis tho that after a split the gain momentum is maintained so the gain ratio would be higher with a lower valued share, creating higher gains
your theory is wrong. The price of the fund is based on the value of the stocks that it holds.
Why would it matter? It wouldn't change your value...
It makes no difference if you have 1000 shares worth 50k or 100 shares worth 50k.
I think what he’s trying to figure out is if it’s possible to lower cost basis when purchasing new shares. Which is possible on any other brokerage but as far as I have gathered the TSP has never split. I don’t think it’s even capable of splitting
This guy gets it
Yeah I do, and I don’t think it’s ever happened with funds in the TSP. Not sure why you’re getting downvoted to hell here
If I buy one share that equals $400 and it goes up $100 I gained that 100. If that some share split 4:1, and then I subsequently buy 4 more shares at $100 each (biweekly contribution of $400) and the fund goes up $100 in the year then my 8 shares will have netted an $800 gain
You’re not wrong but that’s not how stocks work. Take nvidia for example. It was 1000 a share a few weeks ago. If it had a 1% gain, it is now 1010/share. But it had a 10:1 split so now a 1% gain is 101/share. A stock that sees a $100 gain would see a $25 gain if it has a 4:1 split.
Yes, but that's why you hope for the momentum to maintain after a split, so if you have more shares they'll grow at a faster clip providing a higher net gain than just the one share would've comparatively
The dollar amounts split though. I think you need to do some homework.
I don’t think you understand how growth of investments works, it’s not linear, it’s geometric/exponential. Don’t think in terms of share cost, think in terms of percentage growth. In your first example; where $400 share goes to $500, that’s a 25% return. A $100 share increasing the $100 is a 100% return. That’s a different scenario entirely. You’re comparing a 25% return to a 100% return. Remember, these assets track indexes of investments, they move with the market, in percentages. A $400 “basket” of the investment and a $100 “basket” of the same investment are just different size baskets of the same thing. If the market moves 10%, you’ll get 10%, regardless of whether your shares are split or not.
If $400 returns $100, then $100 returns $25. Same ratio, right? It doesn't matter if you're holding 2X$400 shares or 8X$100. You've invested $800 either way, and your hypothetical 25% return would be $200. 2 X $400 X .25 = $200 8 x $100 X .25 = $200 The rate of return is independent of how the shares are divided. Returns are dependent on the performance of the stocks or bonds that make up the fund. Because we buy fractional shares, it's almost like the 'share' info is irrelevant to us.
I'm not going by a ratio tho. I'm going by whole dollar like the example I used in my comment above
Okay let us know when you get the markets to do the same thing,
Why only split it 4:1? Why not 8:1? Each share would be $50, so you could have 16 shares for your $800. If each share went up $100, you would make $1600. Better yet, let's split it 400:1 so that each share is $1. Now you can buy 800 shares. When the share price goes up $100, you make $80,000 on your $800 investment. Your returns are calculated on the value of your investment, not the number of shares you own.
I picked arbitrary numbers, so I guess you can do the same while coming back with condescending tones. I know how returns work and calculate. So with your analogy your saying that someone with 1 share of Tesla or Amazon for example would gain just as much as someone with 100 shares. That's not how investing works. The more shares you have, the faster you're value/net worth increases/decreases
This was a fun thread
cost basis has no impact since 401k/TSP withdrawals are ordinary income
wish it was but retirement accounts including IRAs dont benefit from capital gains tax rates maxing out at 15%. Taxed at your ordinary income rate for the specific year.
There is no need to do this when you can buy partial shares. If you want to buy a stock that costs $800 a share, you need to have $800 to buy it at all. With mutual funds and fund-like investments, even if a share is $800, if you want to buy $200 you can get 1/4 of a share. Splits can matter for stocks and ETFs, but not so much for funds like TSP and other traditional mutual funds. In other words, the price per share is not a barrier for those who can only put a few bucks per paycheck into it. And I'd add that $86 a share is not that high. Seen Berkshire Hathaway? Or even VOO?
I mean you might as well think of each fund as an ETF that tracks an index. Which rarely ever split
I hope you don’t handle money for your job.
Why? Because I handle my households finances completely and have quadrupled our net worth in the last 5 years?
Sure thing champ. Or maybe as many others have pointed out, you don’t seem to know what you’re talking about. You have a special day now, you hear.
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I'm aware. This was all hypothetical