Should You Buy This Vanguard Fund That’s Soared 136% Over 3 Years Before April 17?

Technology stocks and funds have skyrocketed in recent years as investors rushed to get in on the next big revolution: artificial intelligence (AI). Like the internet or the printing press, AI may enter history books as one of the biggest transformations in the world of technology. And companies and investors involved in the early stages may score a major win.

This idea has sparked investor interest in tech stocks and funds, driving them to highs. And one of these winning assets has been the Vanguard Information Technology ETF (NYSEMKT: VGT). Over the past three calendar years, this exchange-traded fund has soared 136%. Since the start of this year, it’s slipped about 6%, but at about $700 a share, it remains close to its peak price of more than $750.

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In a couple of weeks, the fund’s managers will do something that will drastically change the price of this hot ETF. With this in mind, should you buy shares before the key date of April 17? Let’s find out.

So, what exactly is happening later this month? Vanguard has decided to launch share splits for several of its funds, and one of them is the Vanguard Information Technology ETF. Vanguard says the reason for this is “to widen availability for investors by keeping share prices within accessible trading ranges.”

Before going into the details and answering our question, here’s a quick refresher on how share splits work. A stock or share split offers current holders of a particular asset additional shares — this doesn’t change the total value of their investment, but instead, lowers the value of each share.

The ratio of the split determines how many shares you will hold and their value after the operation. So, for example, in a 10-for-1 split, if you hold 1 share before the operation, you’ll receive nine more shares as part of the deal. This would bring a $1,000 stock or fund down to $100 per share.

The Vanguard IT fund will undergo an 8-for-1 split, meaning holders will receive seven additional shares for every one they already own. And at the price of the ETF today, that would bring each share to just over $85.

As mentioned, companies or, in this case, funds do this to make an asset that’s climbed considerably an easier buy for a broader range of investors. Often, when a stock or fund approaches the $1,000 level, companies themselves or, in the case of a fund, fund management companies decide on a split; the price of $1,000 may represent a psychological barrier for some investors, as they might view the asset as pricey even if the valuation is reasonable. So, this could be a wise move to keep investors interested in a particular stock or fund.

The date of record for the Vanguard split will be April 17, so investors interested in participating in the split should buy before or as of that date. That said, if you buy the stock between this date and the date of the split, the right to the extra shares transfers over to you. In this case, the Vanguard IT fund will begin trading at the split-adjusted price on April 21.

So, now, let’s return to our question: Should you rush to get in on this fund prior to the share split? Not necessarily. Though stock splits lower the per-share price, they don’t change anything fundamental about a company or a fund’s composition. They just make it easier for you to make a smaller investment in that particular asset. Whether you buy the Vanguard IT fund today or in a few weeks, the value of your investment will remain the same.

That said, this particular fund remains a solid addition to any tech portfolio. It offers you exposure to the leading names in technology, as its biggest holdings include Nvidia, Apple, Microsoft, and many others. These are players that established their strengths before the AI boom and are likely to benefit from AI and non-AI business in the years to come.

All of this means that you don’t have to race to buy shares of the Vanguard Information Technology ETF before a certain date — it makes a great investment before or after April 17.

Before you buy stock in Vanguard Information Technology ETF, consider this:

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia and is short shares of Apple. The Motley Fool has a disclosure policy.

Should You Buy This Vanguard Fund That’s Soared 136% Over 3 Years Before April 17? was originally published by The Motley Fool