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.

RELATED FAQS
  1. What advantages do exchange-traded funds have over mutual funds?

  2. Why is it that when investors realize returns on a mutual fund, its price tends to ...

    Mutual funds have been in existence since 1924, when the first open-ended mutual fund was created. Since then, the market ... Read Answer >>
  3. How much of a company's stock can a mutual fund own?

    There is no written rule that stipulates how much of a company a mutual fund can own. Instead, there are two major factors ... Read Answer >>
  4. How often are mutual fund prices updated?

    Learn how often mutual funds must report their price, or net asset value, which is daily for open-ended registered investment ... Read Answer >>
  5. How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group ... Read Answer >>
  6. Can you place a stop-loss order on a mutual fund?

    First, remember that a stop-loss order is a limit order placed with a broker to sell a stock when it reaches a certain price. ... Read Answer >>
Related Articles
  1. ETFs & Mutual Funds

    A Mutual Funds Guide for Young Investors

    Learn how mutual funds work, why they are so popular and how younger investors can get started by putting mutual funds in their IRAs or 401(k)s.
  2. Investing

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  3. ETFs & Mutual Funds

    Trading Mutual Funds For Beginners

    Learn about the basics of trading and investing in mutual funds. Understand how the fees charged by mutual funds can impact the performance of an investment.
  4. ETFs & Mutual Funds

    A Guide to Mutual Funds Trading Rules

    Make sure to review this guide on the dos and don'ts of mutual fund trading before you invest, including how trades are executed and which fees to look out for.
  5. ETFs & Mutual Funds

    How to Rate Your Mutual Fund Manager

    What to really look for when you're deciding on a mutual fund.
  6. ETFs & Mutual Funds

    Trading Mutual Funds for a Living: Is It Possible?

    Find out why trading mutual funds for a living isn't your best bet, including how funds discourage short-term trading and which options may better serve you.
  7. ETFs & Mutual Funds

    4 Mistakes to Avoid When Choosing Mutual Funds to Invest in

    Mutual funds are a great way to build wealth but not all of them are the same. Investors have to be mindful of fees, turnover, redundancy and performance.
  8. ETFs & Mutual Funds

    The Advantages Of Mutual Funds

    Learn how to get diversification, liquidity and professional management at an affordable price.
  9. ETFs & Mutual Funds

    5 Secrets You Didn’t Know About Mutual Funds

    Learn five of the "secrets" about mutual funds that can have a significant impact on mutual fund choices and investor profitability.
  10. ETFs & Mutual Funds

    How liquid are Fidelity mutual funds?

    Review the liquidity features of mutual fund shares and an overview of Fidelity mutual funds. Most investors look for convenient access to their investments.
RELATED TERMS
  1. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  2. Net Asset Value - NAV

    A mutual fund's price per share or exchange-traded fund's (ETF) ...
  3. Forward Pricing

    A Securities and Exchange Commission regulation that requires ...
  4. Exchange-Traded Mutual Funds

    Investopedia explains the definition of exchange-traded mutual ...
  5. Mutual Fund Yield

    Dividend payments divided by the value of a mutual fund’s shares. ...
  6. NAV Return

    The change in the net asset value of an exchange-traded fund ...
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center