When Are Mutual Funds Priced? The Daily Pricing Process

Mutual funds allow individuals to pool money for diversified investments, offering access to professional management and broader market exposure. Unlike individual stocks, which trade continuously, mutual funds have a distinct pricing mechanism that governs how and when their shares are valued.

Understanding Net Asset Value (NAV)

The price of a mutual fund share is determined by its Net Asset Value (NAV). NAV represents the per-share value of the fund and is the price at which investors buy and sell mutual fund shares. It is essentially the fund’s total assets minus its liabilities, divided by the number of outstanding shares.

To calculate NAV, a fund aggregates the current market value of all its holdings. From this total asset value, it subtracts any liabilities. The resulting net value is then divided by the total number of shares currently held by investors. This calculation provides the single price per share for that day’s transactions.

The Daily Pricing Process

Mutual funds are typically priced once a day, after the major U.S. stock exchanges close, usually around 4:00 PM Eastern Time. The Securities and Exchange Commission (SEC) mandates a “forward pricing” rule, which means that mutual fund transactions are executed at the next calculated NAV after the fund receives an order.

Any buy or sell order received before the daily cutoff time will be processed at that day’s NAV, determined after market close. For instance, an order submitted at 3:00 PM ET on a Monday will receive Monday’s NAV. If an order arrives after the cutoff, it will be processed at the NAV calculated on the next business day. This system ensures fairness by preventing trading on information released after market close but before the fund’s price updates.

Impact on Your Transactions

The daily pricing process and cutoff time directly influence when your mutual fund transactions are completed. For most mutual funds, the typical cutoff for same-day NAV is 4:00 PM ET. If you place an order at 3:30 PM ET on a Tuesday, your transaction will be executed at the NAV calculated that Tuesday evening.

If you place that same order at 5:00 PM ET on Tuesday, after the day’s NAV has been determined, your order will not be processed until the next business day, Wednesday, and will be executed at Wednesday’s NAV. Mutual funds do not calculate NAV on market holidays or weekends. Any orders placed on a non-business day will be processed at the NAV determined on the next available business day.