| Just getting started in mutual funds, and | | | | fund, divided by the number of units sold. |
| wondering about all those numbers you see, and | | | | Consider an equity fund that is made up of |
| wondering what they all mean? In this article, we'll | | | | exactly 100 stocks, and say the cost of those |
| go through the basics. | | | | stocks right now is exactly $1-million dollars. Let's |
| First, though, you should know that there is no | | | | also say that 100-thousand units of the mutual |
| intrinsic value to a fund. For example, you might | | | | fund have been sold to investors like us. Dividing |
| look up the value of a used car in a reference | | | | that $1-million value of the stocks by |
| book and see a price range for it. That's a | | | | 100-thousand units gives us a price of $10.00 per |
| relatively stable price, and you can predict what | | | | unit. If, six months from now, the price of the |
| the price will be 3 months, one year, and maybe | | | | stocks making up the fund increase in value to |
| even three years from now. | | | | $1.5 million, then the price would increase to |
| But, fund prices aren't at all predictable. They're | | | | $15.00. |
| based on the value of the stocks or bonds held | | | | The price of the fund always goes up and down |
| by that particular mutual fund. And those prices | | | | with the prices of the stocks. Some stocks may |
| vary according to market sentiment, or more | | | | go up in price and others may go down, but the |
| specifically, according to the collective | | | | mutual fund's price will always be the combined |
| expectations of all investors at any one point in | | | | value of all the stocks owned by the fund. |
| time. You'll get a sense of those expectations | | | | There's a technical name is Net Asset Value or |
| when you watch the daily ups and downs of the | | | | Net Asset Value per Share. Normally you'll see |
| Dow Jones Index and similar indices. | | | | those abbreviated to NAV and NAVPS. And, |
| If you see a pure equity fund, one that's made | | | | that's what you'll be looking for when you go |
| up entirely of stocks (shares in corporations), then | | | | online or open your newspaper to see whether |
| those prices will reflect the value of those stocks. | | | | you're winning or losing at the mutual fund |
| Let's be more specific again: Mutual fund prices | | | | investment game. |
| are the total amount of all stocks bought for the | | | | |