If you're going to invest in mutual funds, it's good to learn some of their lingo -- such as the term "net asset value" (NAV). A fund's NAV is essentially its share price.
Mutual fund prices don't fluctuate during the day. Since funds are composed of many different securities, fund companies wait until the end of trading each day, when they add up the current market value of all their holdings. They then subtract the fund's expenses for the day, such as commissions paid. The result is divided by the number of shares of the fund that exist -- and that's the NAV.
Because of this pricing structure, there are special rules about buying and selling shares of a mutual fund. Orders need to be placed before the market's close (4 p.m. ET), and many fund companies require orders to be placed even earlier. However, the NAV of the fund won't be calculated until well after the market's close, so the price at which orders are executed won't be determined until hours after they're placed.
There's much more to learn about funds, in our Mutual Fund area and our Index Fund area. If you're looking for a good book on mutual funds, don't pass up John Bogle's Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor. Finally, discuss all aspects of mutual fund investing on our Mutual Funds discussion board.
