What is the Secret of Mutual Fund to Define Price?


I know that you, like many new investors, are not familiar with the trading process of mutual funds. Many new investors tend to confuse mutual funds with stocks. In their opinion, the trading rules of mutual funds may not be different from the trading process of stocks.Let me tell you why there is a significant difference between mutual funds and stocks.

The first reason is that mutual funds, for investors, are securities that can be redeemed for investment. Stocks are very important to them as valuable securities that can be traded.

The second reason is that the trading partner of mutual funds can only be the company issuing these funds or the members within the group.

The third reason is that we will introduce it in detail next. The one-day buying and selling price of mutual funds is very different from the one-day buying and selling price of stocks issued by companies.

Professional mutual fund traders often define the buying and selling price of mutual funds through forward pricing. At the same time, each mutual fund needs to be calculated and reported to the trading institution every day after the stock market is closed. Mutual funds are not defined in the whole day, but in the last period of time, the asset value is calculated to have a price. When investors buy or sell these mutual funds, they need to perform operations after the end of the trading day. So if investors buy mutual funds during the working hours before the stock market closes. The prices of these mutual funds were the previous day because the new prices were not calculated.

Therefore, the prices of securities in these portfolios are not stable. Mutual fund traders spend the whole day processing purchase applications or sales orders sent by investors around the world. It is precisely because of the common existence of these factors that the price of mutual funds has been changing with the needs of investors. Therefore, traders decided to uniformly calculate the final price of these funds at the last time of the trading day.

The way to define mutual funds in detail and the calculation formula are largely influenced by the market value and investment portfolio of the fund. Traders usually use the final price of securities and other equivalents to get the value of mutual funds. In addition, the prices of all mutual funds should be reported to the Securities and Exchange Association within the specified time and be open and transparent to the public.

In addition, NAV can be used as an alternative financial index to help you analyze the final price of mutual funds in some cases.

In summary, the common way to define the price of mutual funds is forward pricing. What you need to know is that forward pricing helps traders calculate mutual fund prices and make these data available to the public. However, you can't just rely on this method to decide when to buy mutual funds.