A:

The easiest way to find out the price of a mutual fund is to look at its net asset value (NAV). NAV is the total value of a mutual fund's assets, less all of its liabilities. Many mutual funds use this number to determine the price for transacting units of the fund. When you buy and sell mutual funds, you typically do so at the NAV.

For most mutual funds, the NAV is calculated daily since a mutual fund's portfolio consists of many different stocks. As each one of these stocks may be changing in price frequently throughout the day, an exact value of a mutual fund is difficult to determine. Thus, mutual fund companies have chosen to value their portfolio once daily, and each day this is the price at which investors must buy and sell the mutual fund. The exact valuation technique may vary from fund to fund as some may use an average of the last three traded prices. All mutual funds, however, set a valuation of their NAV once a day.

In the case of an exchange-traded fund (ETF), which is an index fund that trades like a stock, the NAV is first determined when the fund is created, and then market forces determine the price of the shares of the fund. Typically, the NAV of an ETF will be relatively close to the market price of the fund; however, there may be instances when the price is higher or lower than the NAV.

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