Comments on: How is a Mutual Fund’s Share Price (NAV) Determined?

By: Gregg

Gregg — Fri, 05 Mar 2010 15:53:35 +0000

AH,

You are right that the NAV would increase, but so would all the underlying securities as well as all other funds that hold those securities.

Think of how much buying pressure there would need to be in a mutual fund so that there is (on average) a price impact on all ther shares held in the fund. This hypothetical works, but not in practice.

By: AH

AH — Fri, 05 Mar 2010 15:10:40 +0000

Can supply and demand not have an effect?

It would require significant investment, but with increased demand for the fund, you have increased money flowing into the fund.

This then in turn would cause incresed money flows (demand)to the assets into which the fund is invested.
The demand for the underlying increases, therefore the price rises, therefore the NAV of the fund increases?

By: G.E. Miller

G.E. Miller — Thu, 21 Jan 2010 23:49:06 +0000

@ Dean – No. # of shares on open ended mutual funds have no impact on price. New Shares are issued at the price of existing shares.

By: Dean

Dean — Thu, 21 Jan 2010 20:46:33 +0000

Let me try to understand this correctly: If there are demands then the fund manager can issue more shares as needed, wouldn’t that reduce the fund’s price then?

By: Gregg

Gregg — Tue, 20 Oct 2009 20:28:41 +0000

Great description except for seconday offerings. There is only value destruction or dilution if secondary shares are issued below market prices. Corporate Finance 101.

By: direct shares

direct shares — Fri, 28 Aug 2009 02:36:03 +0000

I know a thing or two about fund and I thought that it was enough to start investing in it. Good thing I have done more research and read your post about it. I also thought that all funds are traded same as the stock and prices are determined on the stock performance. Thank you for the help.

By: rahul

rahul — Tue, 03 Mar 2009 07:03:38 +0000

Useful information presented consicely.
thanks

By: Sheriece

Sheriece — Fri, 01 Aug 2008 01:12:04 +0000

Not my area of expertise, but interesting none the less. I have always had my funds managed, they haven’t faired very well. Thanks for the info.

By: James

James — Sat, 17 May 2008 01:44:06 +0000

Thank goodness that individual fund managers really do not matter all that much any more. In many cases the team of nerds that track each sector have as much or to do with the success of a fund. I never was comfortable with trusting all my hard earned cash to one individual that may or may not be all that stable.

By: Premium Financing

Premium Financing — Fri, 16 May 2008 16:24:59 +0000

Thanks for the information i also had some of those errors in the way i thought that you’ve outlined. To be fair i didint even know there was two types of funds, open and closed lol.