Open-End Funds (Mutual Funds)
Chapters in this video
- 0:00 The restaurant with no prices: forward pricing preview
- 1:43 Continuous share creation and the margin or short sale trap
- 2:50 Net asset value formula and once-daily calculation
- 3:32 Forward pricing and the 4:00 PM ET cutoff
- 5:04 Public offering price, sales loads, and the buy-POP redeem-NAV rule
- 5:48 The 7 calendar day redemption requirement
- 6:12 Fund objectives: growth, income, balanced, and sector
- 7:03 Balanced versus growth and income: the all-equity trap
- 7:35 Rapid-fire exam recap
What this video covers
- How open-end funds continuously issue and redeem shares with the fund company itself, not on an exchange
- Why mutual funds cannot be purchased on margin or sold short, since they lack secondary market trading
- Calculating net asset value (NAV) from total assets, liabilities, and shares outstanding, and why NAV is computed only once daily after the close
- Forward pricing mechanics: the 4:00 PM ET cutoff and why you never know your exact price when placing an order
- Deriving public offering price (POP) from NAV and sales load, including the POP formula where the load is a percentage of POP not NAV
- The buy-POP, redeem-NAV rule and why the exam loves to flip these
- The 7 calendar day redemption deadline and how the SIE baits test takers with "business days"
- The distinction between growth and income (all equity) versus balanced (stocks and bonds), and why objective is not structure
Read the full lesson, free
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