-=PCTechTalk=- Re: offtopic,mutual fund questions

From: "Don" <dsw32952@xxxxxxxxx>
To: <pctechtalk@xxxxxxxxxxxxx>
Date: Mon, 2 Feb 2009 03:41:13 -0800
The price of a mutual fund share is called Net Asset Value or NAV.  It is 
determined, for most funds at the end of each market day.  Orders to 
purchase, sell or exchange to another fund are executed at the NAV on the 
day the order is received if the order is received before the market closes 
or earlier for some funds.

Some funds also reserve the right to apply a fair market price to some 
holdings when determining NAV.  This allows fair pricing when an event 
occurs too late in the day or after market closing to have a fair impact on 
the holdings price.  This is common in funds that invest internationally and 
foreign events plus time zone differences can have a serious effect on asset 
pricing.  This also prevents shareholders from exploiting price changes in a 
market that closes a few hours than our markets do.

Google these:

NAV or Net asset value
mutual fund fair market pricing

 Don

When my sub has been approved at PC tabletalk I will shift further replies 
there.


----- Original Message ----- 
From: "Gman" <gman.pctt@xxxxxxxxx>
To: <pctechtalk@xxxxxxxxxxxxx>
Sent: Saturday, January 31, 2009 2:33 PM
Subject: -=PCTechTalk=- Re: offtopic,mutual fund questions


> It's off-topic, but this affects just about everyone and it's probably on
> most folks minds more than they care to admit.  So let's get to it.  Note
> that the following ONLY applies to investments based in mutual funds.  Any
> other type of investment would need to be valuated separately.
>
>
> I'm about 20 years removed from a stunted career in financial services
> (Reaganomics put many of us out of business back then), but the advice I
> always gave holds true just as much today as it did back then.
>
> When you buy into ANY form of mutual funds (including a 403b), you're 
> buying
> 'shares' of that fund at whatever price the fund's collective investments
> are worth at the time of purchase.  A fund is a collection of stocks, 
> bonds,
> futures, etc. that collectively determine the value of the individual
> shares.  A decently managed fund will also have a certain amount of their
> 'investments' kept aside as uninvested 'cash' to allow them to move in
> quickly on good opportunities (or as a hedge against loss during troubled
> times like these).  The most important thing you need to understand is 
> that
> no matter what happens to the price of the underlying investments, you 
> don't
> own any of them.  As companies begin showing heavy losses, the fund will
> shift those investments to other companies that are doing better.  If the
> overall economy turns for the worse, they will aim to focus on businesses
> and investments that are most likely to better weather the harsher 
> financial
> climate.  If a company goes out of business, they are in a much better
> position than the rest of us to know ahead of time and pull their
> investments out before the inevitable quick plunge to 'worthless', even
> though such a loss would only represent a small percentage of the overall
> 'fund'.
>
> However, no matter how all of that shakes out on their end, you STILL have
> that same number of shares (more if you're reinvesting any dividends you
> receive &/or are still actively contributing to the fund) and are, in a 
> way,
> isolated from the stocks/bonds ups & downs that the fund managers have to
> deal with daily.  Even if your fund happens to 'go under', it will be
> absorbed by another fund and you'll STILL have your shares.  The "Sell
> Value" of them will just be determined by the efforts of a different set 
> of
> fund managers that was obviously stronger than the one that closed its
> doors.
>
> I just saw that Don tossed in the old equation to Buy Low, Sell High
> (provided you're not needing to pull out your money soon).  He's 
> absolutely
> right and, in my previously professional opinion, now would be the 
> absolute
> worst time to sell ANY mutual fund shares.  For one thing, you'll get very
> little for them compared to what they used to be worth.  But the worst 
> part
> is that you'll lose out on the rebound profits when the economy eventually
> turns around (and of course it will - it's just unknown how long it will
> take to turn it around).  Remember that as long as you own shares in a
> mutual fund, you're safe from individual company closings and you don't 
> need
> to even think about following the market until you're within several years
> of retirement.  Even then, you don't have to start making withdrawls from
> retirement plan-type packages (401k, 403b, etc.) until the age of 70 or so
> (that may have changed since I last looked it up), so if you don't need 
> the
> money the moment you retire, you can still leave it in there to soak up 
> even
> more of the economic recovery rebound.
>
> All told, the only folks who should turn out to be negatively affected by
> this economic downturn are those who are very close to retirement (or
> mandatory withdrawl) age, didn't pull out before the severe drop in share
> prices and will actually need to use that fund money to live on.  You can
> add to that group anyone else who panics and sells their shares now.
>
> So, unless you're very close to absolutely HAVING to pull out your money 
> in
> order to survive, hang in there and stop reading the financial section of
> your local paper.  You'll thank me later when your share prices go back 
> up.
>
> Peace,
> Gman
>
> "The only dumb questions are the ones we fail to ask"

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-=PCTechTalk=- Re: offtopic,mutual fund questions

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