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. 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 >>
  2. 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 >>
  3. 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 >>
Related Articles
  1. Financial Advisor

    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

    What You Need to Know About Mutual Funds

    Mutual funds are a good investment opportunity, but investors should know how they operate.
  3. Financial Advisor

    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.
  4. Investing

    Are Mutual Funds A Relic?

    We list some options other than mutual funds for your retirement plan.
  5. Investing

    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.
  6. Investing

    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.
  7. Financial Advisor

    How to Rate Your Mutual Fund Manager

    What to really look for when you're deciding on a mutual fund.
  8. Investing

    The Advantages Of Mutual Funds

    Learn how to get diversification, liquidity and professional management at an affordable price.
  9. Investing

    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.
  10. Financial Advisor

    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.
RELATED TERMS
  1. Forward Pricing

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

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

    Dividend payments divided by the value of a mutual fund’s shares. ...
  4. Net Asset Value - NAV

    A mutual fund's price per share or exchange-traded fund's (ETF) ...
  5. Mutual Fund Custodian

    A trust company, bank or similar financial institution responsible ...
  6. Fund Supermarkets

    An investment firm or brokerage that offers investors a wide ...
Hot Definitions
  1. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price ...
  2. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  3. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center