Share Value

• The term for the share value of a mutual fund is the fund's net asset value, NAV. The NAV is the total value of the securities owned by the fund divided by the number of shares owned by investors in the fund. The NAV is the share price published by the mutual fund and financial information services. The redemption value of any sold shares is based on the NAV for the day the redemption request is received by the fund company.
  
  

Time Frame

• The NAV of a mutual fund is calculated once a day, after the stock and bond markets close. A fund will use the closing values for the securities it owns to determine the total value of the fund's portfolio. The portfolio value is then dividend by the number of shares owned by investors to determine the NAV. All redemption requests received by the fund during the day will be completed at the NAV that is calculated at the end of the day.
  
  

Significance

• A mutual fund investor who phones in a redemption request will not know the exact value of the shares to be redeemed. The NAV for the day is not calculated until after the markets close and after any redemption requests for the day have been accepted. This means an investor cannot be given a value for the share or a redemption amount when she calls the fund or her broker to sell mutual fund shares.
  
  

Fund Redemption Fees

• There are several circumstances when a mutual fund investor will be charged a fee to redeem shares. Broker-sold mutual funds in class A or C shares will have a contingent deferred sales charge (CDSC) for up to six years after the shares were purchased. Some no-load mutual funds charge a redemption fee if shares are sold within 30 or 90 days after purchase. These fees are to prevent investors from trading in and out in an attempt to time the market. A mutual fund's prospectus will list any CDSC or redemption fees.
  
  

Warning

• Mutual fund investors who look up the current share price of their fund and expect to receive that value will be either disappointed or pleasantly surprised. The value of redeemed shares cannot be determined at the time the sell order is made with the mutual fund company. An investor can look at the stock or bond market at the end of the day and estimate if his redeemed share value will be higher or lower based on whether the market went up or down for the day.