Characteristics of Open-End Funds (Mutual Funds)

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Chapters in this video

  1. 0:00 Forward pricing and the 4 PM NAV cutoff
  2. 0:58 The next computed NAV rule and exam traps
  3. 2:03 Calculating POP from NAV and sales charge percentage
  4. 3:16 Why sales charge is a percentage of POP, not NAV
  5. 4:21 Fund family exchanges and the tax consequence trap
  6. 5:45 Rapid-fire exam recap

What this video covers

  • Why forward pricing means investors always receive the next computed NAV, never the current or previous one
  • How the 4:00 PM Eastern cutoff determines whether an order receives that day's NAV or the next business day's NAV
  • The NAV per share formula: total assets minus total liabilities divided by shares outstanding
  • Why POP equals NAV plus the sales charge, and how no-load funds eliminate that sales charge entirely
  • The critical POP calculation: NAV divided by (1 minus sales charge percentage), and why multiplying NAV by the sales charge percentage leads to the wrong answer
  • Why the sales charge percentage is always computed as a percentage of the POP, never of the NAV
  • How fund family exchanges work at NAV without new sales charges, and why they remain taxable events with realized gains or losses

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