Investment Companies - Mutual Fund Marketing and Pricing

Mutual Fund Marketing
Mutual fund shares are marketed according to the rules established by the Investment Company Act of 1940.

Any mutual fund advertisement containing performance data must include a legend that discloses these important facts:

  • the data represents past performance and is not an indication of future results
  • an investor's principal value will fluctuate and may be worth less than the original amount invested.

Mutual fund advertisements are also required to state where a potential investor may obtain a prospectus, and they must recommend that the investor read the prospectus carefully before investing any money. No application to invest in the investment company's fund may accompany any type of mutual fund advertisement. You can find more detailed information on FINRA rules concerning mutual fund marketing in the Marketing and Sales Presentation section.

Mutual Fund Pricing
Investors must always pay the full price when buying mutual fund shares. The full price represents the net asset value plus a sales charge (if applicable). This is called the public offering price (POP).

Net Asset Value (NAV) Per Share
Net asset value
(NAV) is determined by dividing the net assets of the fund by the total number of outstanding shares. The NAV must be computed at least once a day. The NAV is calculated at the end of trading on the New York Stock Exchange; orders to buy and sell the fund are based on the price to be computed at that time, so if an investor buys shares of the fund at 10:30 a.m., the price paid will not be known until after the close of trading on that day.

To calculate the NAV of a mutual fund, remember the following formula:
 

NAV = (Assets - Liabilities ) / Number of outstanding shares

Sales Charges and Expenses


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