Mutual funds don’t keep performance secrets from their shareholders.

You can find a mutual fund’s current price — and much more information about the fund — on financial news websites, the investment company’s website, and in the financial pages of a newspaper.

These daily reports are usually limited to the most recent NAV and percentage change from the previous trading day. The monthly and quarterly reviews provide substantially more detail about fund cost and performance.

Unlike a stock or an exchange traded fund (ETF), whose price changes constantly throughout the day as investors buy and sell shares, a mutual fund’s net asset value (NAV) is fixed at the end of each trading day.

That price remains in effect until the close of trading on the next day.

Figuring the price

After the markets close, each mutual fund:

  • Multiplies the final price of each of its underlying investments by the number of shares of that investment the fund owns
  • Adds those amounts to figure total value and subtracts fees and expenses
  • Divides the net value by the number of fund shares that investors own to calculate the fund’s new NAV
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This information is forwarded to FINRA, the Financial Industry Regulatory Authority, which passes it to financial reporting firms.

These companies calculate each fund’s performance based on the most recent data. Some of them, including Standard & Poor’s, Lipper, and Morningstar, evaluate the funds using many different criteria, such as returns over specific time periods, performance compared to other funds with the same objective, and the suitability of funds for specific investor goals. This information is available on fund-company’s and other websites and in the financial press.

The Language of Mutual Funds

Year-to-date return (YTD) is the total return since the beginning of the current year, and assumes that all distributions were reinvested.

Ratings compares a fund with other funds of the same general type or having the same objective, or both. The rating may use stars, with 5 stars being the highest, or letters — with A being the highest and E the lowest — or numbers, typically from 1 to 5.

Be sure to check the explanation or footnotes to find out how the ratings are determined.

Fund performance, calculated as total return, is reported for several different time periods. The results are figured assuming that all distributions have been reinvested and that annual operating expenses, but not sales or redemption charges, have been subtracted.

The longer the fund’s history, the more clearly you can see how it has performed in different market conditions.

The Language of Mutual Funds 2

The figure for 1 year reports on the previous 12 months. The reports for 3, 5, and 10 years, when they’re available, are annualized to give you the average figure per year.

Expense ratio is the percentage of the fund’s current income that’s deducted each year to cover your share of the fund’s operating expenses.

Fund objective describes the fund’s investment goal.

Glossary Of Mutual Funds Terms by Inna Rosputnia

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