Mutual funds are transparent about their performance. You can access current prices and detailed fund information through financial news websites, the investment company’s website, and financial newspapers.

Daily reports typically include the most recent net asset value (NAV) and the percentage change from the previous trading day.

For more comprehensive details on fund costs and performance, refer to the monthly and quarterly reviews.

Unlike stocks or ETFs, which have prices that fluctuate throughout the trading day, a mutual fund’s NAV is set at the end of each trading day and remains unchanged until the close of trading the next day.

Figuring the price

After the markets close, each mutual fund:

  1. Multiplies the final price of each of its underlying investments by the number of shares of that investment the fund owns.
  2. Adds those amounts to determine the total value of the fund’s holdings and subtracts fees and expenses.
  3. Divides the net value by the number of fund shares outstanding to calculate the fund’s new net asset value (NAV).

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This information is forwarded to FINRA (Financial Industry Regulatory Authority), which then passes it to financial reporting firms.

These firms, such as Standard & Poor’s, Lipper, and Morningstar, use the most recent data to calculate and evaluate each fund’s performance. They assess various criteria, including returns over specific time periods, performance relative to similar funds, and the suitability of the funds for particular investor goals. This information is available on fund company websites, financial news sites, and in the financial press.

The Language of Mutual Funds

Year-to-date (YTD) return represents the total return on a mutual fund since the beginning of the current year, assuming all distributions are reinvested.

Fund ratings assess how a fund performs relative to others with similar objectives or types. These ratings may be expressed using stars (with 5 stars as the highest rating), letters (with A as the highest and E as the lowest), or numbers (usually from 1 to 5). Always review the explanation or footnotes associated with these ratings to understand the criteria and methodology used for their determination.

Fund performance is reported as total return for various time periods, reflecting the gains or losses with all distributions reinvested and annual operating expenses deducted (but not sales or redemption charges).

A longer performance history provides a clearer picture of how the fund has fared under different market conditions.

The Language of Mutual Funds 2

  • 1-Year Return: Reflects the performance over the past 12 months.

  • 3, 5, and 10-Year Returns: Annualized figures that represent the average annual performance over those periods.
  • Expense Ratio: The percentage of the fund’s income deducted each year to cover operating expenses.

  • Fund Objective: Describes the investment goal of the fund.

Glossary Of Mutual Funds Terms by Inna Rosputnia

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