How do mutual funds give you the exact Ending NAV of the day?

Just wondering: When I place an order to invest 10K in a mutual fund today, I get today's closing price as my purchase price. How?
My thinking is that after today's market close, the Mutual Fund adds
up all the deposits and withdrawals and gets the Net change. Then, next day they go out and buy securities worth this net amount at the prevailing market price of each individual security...how do they end up guaranteeing the previous day's closing price? Won't they end up with excess cash some times and a shortfall other times based on the difference in prices from the previous day's close?
Thanks.
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After the market close, the fund prices and values its portfolio and subtracts off any liabilities to arrive at net assets. It then divides that by the number of shares outstanding to get NAV.
Once NAV is set, the fund can process purchases and redemptions. It'll net the incoming requests to arrive at a net purchase or net redemption figure. If it's a net purchase, the fund increases its assets by the amount of the purchase and creates and issues the appropriate number of shares. If it's a net redemption, the fund decreases its assets (or creates a liability) and destroys the appropriate number of shares. Since all these transactions are at NAV, even though the fund's assets change, NAV remains unchanged.
Once this is all done (and it happens instantly), NAV is no longer relevant until the close of the next business day. So there's nothing to "guarantee".
-- Rich Carreiro snipped-for-privacy@rlcarr.com
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Note that if there are a huge net increase or decrease in assets, since they try to process that change via cash if possible, it can slightly affect the fund's portfolio (and therefore allocation). If a fund is, say, 10% cash and there are net redemptions which add up to 2% of the portfolio (that's a huge move in a single day!) after processing all that, the fund will be only 8% cash. (well, actually, 8.2% but let's not pick nits). You'll note in most prospectus that there is a provision where if certain folks try to redeem too much at once, they reserve the right to redeem some of it in kind - in shares of stocks the portfolio held, rather than cash.

The NAV is still *right*, though, until trading starts the next day.
If you have a portfolio with $1million and, say, 100,000 shares outstanding and there's a net purchase of 1000 shares ($10,000), the portfolio is now worth $1,010,000 and there are now 101,000 shares outstanding, each still worth $10. What effectively happens is that the 100,000 shares which were already outstanding get slightly diluted - after that transaction, each of those shares represents a tiny bit more cash than before and a tiny bit less of the stocks (or whatever!) was already in there. (And similar for a net redemption - afterwards, each share represents the same *value* as before - only it's now a slightly higher proportion stocks and slightly lower proportion cash).
(in real life, it's a bit more complicated as the portfolio also deducts expenses daily, prorated at different rates for different share classes, etc. etc. Plus, it's not always the case that they can get real quotes for everything in the portfolio, so some stuff may just get a best guess. Plus, often, some currency exchange rates need to be factored in, too)
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What about funds holding foreign stocks that have closed in earlier time zones? This used to allow folks to scam the system by trading funds that used obsolete closing prices of a few hours or even a four day weekend old. In the meantime before YOUR closing, some news had arisen that was sure to rock those stocks in a certain direction.
So somehow I think the "fair value" of certain (non-ADR) stocks are used, which is different than (but connected with?) futures. I wonder what do they do for stocks in a market to the west which is still trading at your closing time, or one to the east that closed earlier?
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dumbstruck wrote:

There was a lot of talk about this several years ago, it was one of the issues in the mutual fund trading scandals. The SEC adopted a new rule in 2004 which makes this a disclosure item in the fund prospectus -- describing how the fund deals with it. If you google "fair value pricing" you should find a lot of info.
-Tad
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You can't trade most funds. Besides, unless a fund is mostly invested in foreign stocks, one stock is not usually going to have a major impact on the NAV.

Outside of NAS and the DOW and perhaps the American Stock Exchange, these other stock exchanges trade stocks that are not owned by most mutual funds.
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When did you get this price? MF NAV are usually not calculated until after the market is closed. So if you place a buy or sell order today, you'll get today's closing price, which won't be known until after the market is closed.

They don't have to deploy all their cash everyday. Yes they'll have cash positions.

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