What Factors are Involved in Mutual Fund Pricing?

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  • Written By: Keith Koons
  • Edited By: Jenn Walker
  • Last Modified Date: 26 August 2019
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There are several factors involved in mutual fund pricing, and it definitely pays for investors to understand each of them. The base price of any mutual fund includes the relative value of all the stocks and any other commodities included within the purchase price for one share. This figure is normally a representation on how well the companies behind these stocks are doing in terms of cash flow and profit. Another aspect of mutual fund pricing is the overall demand for the mutual fund — and each stock contained within it — because as interest peaks and falls, the price will adjust accordingly. One of the most overlooked factors of mutual fund pricing is the fees associated with buying the stock; in many cases, it can turn a seemingly strong investment into a poor choice.

Mutual fund pricing is primarily determined by net asset value (NAV). NAV is the total value of assets minus the liabilities, divided by the number of outstanding shares. The price of stocks changes constantly throughout the day as trading progresses, but NAV is only calculated once a day. When evaluating shares to determine a company’s assets and profit from sales, NAV can be very useful. Companies such as investment trusts enable investors to diversify their portfolios by backing these steady, long-term growths, and the NAV is the main tool used to calculate their potential.


Another determining factor in mutual fund pricing is the presence of supply and demand, which is essentially the interaction between buyers and sellers. The most important aspect in this affiliation is the anticipation of the market, such as knowing which elements will influence buyers and sellers since the stocks are in constant interaction. As a result, this correlation determines the trading price of a mutual fund compared to its NAV. Possibilities within the market are endless, so having someone with expert knowledge is usually necessary to achieve consistent results. Trades are typically performed through a fund manager who has expert knowledge about the companies involved.

Mutual fund pricing can also have hidden costs in the form of purchase fees, redemption fees, and exchange fees. These additional costs are usually paid indirectly by investors, and the deductions normally take place when the stock is first purchased. Paying up front can not only influence the mutual fund's overall performance in terms of profit, but can also result in a fund manager who has little incentive to actively monitor the mutual fund. Many stocks do justify this additional mutual find pricing, however, by providing excellent returns on investments through rapid growth and annual payouts.


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