Let's see what it means to an investor when an exchange-traded fund (ETF) undergoes a stock split
I received the following message: The units of ICICI Prudential Nifty Bank ETF have undergone a stock split from a face value of Rs 10 to Re 1, the record date for which is September 02, 2022. What it means to me as an investor in ETF? - Varun Yalvatkar
Fund houses generally announce the stock split at a face value to improve liquidity on the stock exchanges. Stock splits make ETFs more affordable to smaller investors.
As per regulations, the units of ETFs should be mandatorily listed on the stock exchanges.
However, as an investor, nothing changes for you from an investment point of view. If the face value of an ETF changes, the NAV falls and the investor's units are increased proportionately.
Let's say you have 100 units at a face value of Rs 10. After the split, if the face value reduces to Rs 1, your total holding will automatically get revised to 1,000 units. The new units will be credited to your account after the record date.
Check out our section Passively Yours for more stories on ETFs.