Price Mutual Fund

When considering the price of mutual funds we must first understand a little about them. Net Asset Value (NAV) when referring to mutual funds is the full value of all the assets in a fund, less the liabilities divided by the number or shares outstanding. NAV = (assets-liabilities)/shares

Stock share prices differ from Mutual Fund prices according to how they appear on the open marked based on investor's perception of the share value. This could be based on different reasons like a stock's current earnings per share or forecasted future earnings as well as other economic factors. So in other words if more people buy stock it goes up in value but if more people sell the price will drop.

On the other side of the spectrum mutual fund share pricing is calculated on the fund's holdings instead of its perceived value. So the value of mutual funds unlike stock funds is not based on the demand for the share.

A stock share price can be decisively influenced by outside influences but a mutual funds price normally will not be affected by these same factors. Stock fund prices come down to the old basic rule of supply and demand. Only limited numbers of shares are introduced onto the market during an initial offering and although companies can make a secondary offering in the future it tends to devaluate existing shares so is seldom done.

Mutual funds trade as many shares (buy and sell) as there is demand for at the NAV price of the day. Mutual funds are not traded on the open market. If you buy shares for the price of the fund at close of a particular trading session, before the close of the bell or at afterhours the price is set at the last NAV. Mutual funds normally are unlimited in supply and as stated earlier there is no risks from outside interests.

Like most investment options though there is one exception to the pricing of funds. Closed End Funds is a unique type of mutual fund with limited shares and it does trade on the open market.