Mutual fund shares are purchased and sold differently than stock shares. A mutual fund sells and redeems shares directly. There is not a secondary market where shares trade. The share price for a fund is set just once a day and all buy and sell orders are filled at the share price or net asset value (NAV) for the day.
Fund Share Prices
The share price of a mutual fund -- officially known as the net asset value, or NAV -- is calculated once a day after the stock and bond markets close. The NAV is calculated by adding up the closing market prices of all of the securities in a fund's portfolio and then dividing the total portfolio value by the number of shares outstanding. The result is the daily share price of a mutual fund is based on the closing prices of the stocks and bonds held by the fund.
After the NAV is calculated at the end of the market day, all of the orders to buy or redeem shares during the day are filled at the share price calculated for that day. An investor will not know at what price fund shares were bought or sold until late in the afternoon or the next morning. The fund NAV listed during the day is the price from the previous day. The listed price was used to complete all orders received the previous day.
Order Cutoff Time
Daily mutual fund buy and sell orders are accepted up until the stock market closes at 4 p.m. Eastern time. All orders received up to that time will be filled at the NAV to be calculated after the markets close. If you place an order to sell mutual fund shares after the market close, the order will be held over to the next day. That order will be completed one day later at the NAV calculated based on that day's closing prices. Your payment from the mutual fund will also be delayed by an extra day.
Timing a Sale Order
If the purpose of waiting until after the market closes to sell fund shares is to learn the price before selling, that tactic will not work. The accepted order cutoff time is before the NAV is calculated. An order can be timed to sell on a market up day by waiting until near the end of the market day before submitting the fund sell order. The exact share price will not be known, but you will have a pretty good idea whether the fund's daily share price will be up or down from the previous day.
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