3.5.1.2. The Price of a Mutual Fund
The cost of a mutual fund is determined by the net asset value of the fund. The net asset value is the book value of the fund, which is calculated by determining the fair market value of the securities in the fund and subtracting the fund’s expenses (liabilities). The book value is then divided by the number of shares in the fund to get the NAV per share. The investment company uses the proceeds from the sales of shares to purchase more securities in the fund.
NAV = fair market value – fund’s expenses
NAV per share = book value / number of shares
The NAV must be computed at least once each business day, and the calculation typically occurs after the close of the market (4:00 p.m. ET). The NAV is reported to both FINRA and the financial media.
Note: The price of a share in a mutual