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Mutual Fund Trading, Pricing and Fees

Lesson 2 of 2
Duration 5:38
Level Beginner
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• Identify the different ways people can invest in mutual funds
• Know when orders to buy or sell a mutual fund can be placed
• Understand when and how often mutual funds are priced
• Learn how mutual fund share prices are determined
• Know how to explain the major share classes and the fees for each type

Study Notes:

In this second lesson, we will cover how to BUY and SELL mutual funds, how the price of a mutual fund is determined and explain various types of trading fees.

Trading Mutual Funds

You can invest in mutual funds in a variety of different ways. In the US, many people invest through a retirement plan, such as a:

  • 401k plan
  • Individual Retirement Account

Mutual funds can also be bought through:

  • a brokerage firm
  • a bank
  • the fund directly

You can enter an order to BUR or SELL a mutual fund anytime the New York Stock Exchange is open.

Mutual Fund Pricing

Trades in mutual funds are priced at the end of the day. They are priced once daily, after the Stock Market closes. Mutual fund shares are created only at the end of the day due to the way their prices are determined. After the market closes, the mutual fund company calculates the net asset value – or NAV – of each fund they offer. The net asset value is based on the value of ALL the assets, meaning the cash + the securities, in each mutual fund minus any
liabilities DIVIDED BY the number of outstanding shares.

Here’s an example:

ABC mutual fund has $50 million in assets and $10 million in liabilities, so its total value is $40 million. This fund has 4 million shares outstanding. Dividing the fund’s $40 million in assets by the 4 million shares outstanding provides the price per share of $10.

Mutual Fund Fees

The costs and fees of different types of mutual funds vary broadly, and there are several different ways fees may be incurred. Investors are always encouraged to read each fund’s prospectus very carefully and consult with their professional advisor to determine which funds are most appropriate for their specific needs.

Here are some of the more common types of mutual fund fees.

Front-End Load

When investing in Class A shares there is typically a purchase fee or “front-end load”, which means you’ll pay a percentage of your purchase amount every time you buy shares. However, purchases made by a Professional Advisor may be exempt from those fees.

Front-end loads typically range between 3 percent and 5 percent but can be higher.

Here’s an example of a front-end load:

If you buy $10,000 worth of shares of an A share mutual fund that has a 5 percent front-end load, you will pay a $500 fee to purchase those shares, which will come out of your total investment. That means your investment in shares of a fund will be $9,500 instead of $10,000.

Back-End Load

When you purchase Class C Shares there is typically a fee called a “back-end-load”. This fee is also referred to as a “contingent deferred sales charge” or CDSC. Here you don’t pay ANY fees when you BUY shares, but when you sell shares prior to a time period specified in the fund’s prospectus, you will pay a percentage of the dollar value of your
redemption, based on the number of years that you held your fund position. The period is typically 1 to 3 years. If you hold the shares until after the period specified, you won’t have to pay the back-end load.

If you bought shares in your fund on different days, most funds will calculate your CDSC fee using the first-in-first-out method. That means the first shares purchased will be the first ones sold.

Short Term Redemption Fees

Funds that want to discourage short term trading, which is often disadvantageous to the fund’s investors, impose Short Term Redemption fees. These are often referred to by their acronym which is S T R fees. This fee is typically imposed for redemptions occurring within 7 days to 6 months of the original purchase.

No-Load and No Transaction Fee Funds

Do-it-yourself investors can avoid paying sales charges by purchasing No-Load Funds or avoid transaction charges by purchasing No Transaction Fee mutual funds.

No-Load Funds

With a No-Load Fund, NO FEE is directly charged by the fund when shares are purchased or redeemed. Note that sometimes the investor’s broker or advisor may charge a transaction fee.

No Transaction Fee

There are also No Transaction Fee funds or NTFs. That means there are NO FEES charged by the broker or advisor for each of the investor’s trades. But keep in mind there can be Front-End-Load, STR, or Back-End-Load fees charged by the fund for each purchase or redemption.

12b-1 Fees

12b-1 fees may be charged by your investment professional as compensation for the expenses they incur in marketing and servicing your fund investment.

Management Fees

Finally, all funds charge a management fee, and that fee reduces the fund’s overall earnings. The management fee must be disclosed in each fund’s prospectus. It’s also essential to remember that investments have risks, and you can lose your principal.

Join The Conversation

If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.

3 thoughts on “Mutual Fund Trading, Pricing and Fees”

  • S Michael

    To IBKR. Thanks for the education modules.
    Letting you know that on doing the Mutual Fund quizzes, There is an additional quiz for the lesson /module covering : “Purchasing and Transferring Mutual Funds”.
    But on searching for that module, I cannot find it on the site.

    • Interactive Brokers

      Hello, thank you for pointing this out. This is now reflected in the module. We appreciate your feedback.

  • Anonymous

    Please fix typo in “You can enter an order to BUR or SELL a mutual fund anytime the New York Stock Exchange is open.”

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Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Interactive Brokers, its affiliates, or its employees.

Disclosure: Mutual Funds

Mutual Funds are investments that pool the funds of investors to purchase a range of securities to meet specified objectives, such as growth, income or both. Investors are reminded to consider the various objectives, fees, and other risks associated with investing in Mutual Funds. Please read the prospectus accordingly. This communication is not to be construed as a recommendation, solicitation or promotion of any specific fund, or family of funds. Interactive Brokers may receive compensation from fund companies in connection with purchases and holdings of mutual fund shares. Such compensation is paid out of the funds' assets. However, IBKR does not solicit you to invest in specific funds and does not recommend specific funds or any other products to you. For additional information please visit

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