Prices for mutual funds. What do I pay?
Prices for mutual funds. What do I pay?
When I buy a mutual fund (from Vanguard in particular) which price do I pay if I buy before 4pm EST, the one I see on their site (or other interface, e.g. Google Finance) or which will be calculated after 4pm later that day?
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Re: Prices for mutual funds. What do I pay?
If the order is placed before 4pm, you will receive the price at the close of the day.
If you place it after 4pm, then you'll receive the price at the close of the next day, as though you placed the order the next day before 4pm.
RM
If you place it after 4pm, then you'll receive the price at the close of the next day, as though you placed the order the next day before 4pm.
RM
Re: Prices for mutual funds. What do I pay?
So, basically, one never knows what exactly he pays?
Re: Prices for mutual funds. What do I pay?
You will know what you paid when the market closes, but you can't know in advance exactly what you WILL pay when you submit the transaction.Dima wrote:So, basically, one never knows what exactly he pays?
Re: Prices for mutual funds. What do I pay?
CorrectDima wrote:So, basically, one never knows what exactly he pays?
Re: Prices for mutual funds. What do I pay?
Thank you, understood.
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Re: Prices for mutual funds. What do I pay?
Not necessarily. If you buy in dollars, say $40,000 for example, you will know you paid $40,000. But you won't know how many shares that bought until after the purchase is completed.richard wrote:CorrectDima wrote:So, basically, one never knows what exactly he pays?
The surest way to know the future is when it becomes the past.
Re: Prices for mutual funds. What do I pay?
It is the same with stocks if you use a market order. You say buy, your broker buys, and then your broker tells you what you have to pay after you already bought it.Dima wrote:So, basically, one never knows what exactly he pays?
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Re: Prices for mutual funds. What do I pay?
The result is that when buying mutual fund shares, whether Vanguard or other fund companies, you do not know for certain what price per share you will be paying, since your purchase order will not be executed until after the close of the current or the next trading day, whichever is applicable, as already described. If the previous day's closing net asset value (NAV) was the pre-determined purchase, or sale, price, investors could place big orders knowing which way the market had moved and hence how the NAV of fund shares would move after the close of trading. That would a form of arbitrage, giving them an advantage at the expense of current fund shareholders.
Re: Prices for mutual funds. What do I pay?
Of course I meant price per share.
sscritic, with stocks it is different though, transaction is made quickly and you pay approximately the price you saw when you placed your order, or you can place a limit and you won't pay more than you don't wan't to.
sscritic, with stocks it is different though, transaction is made quickly and you pay approximately the price you saw when you placed your order, or you can place a limit and you won't pay more than you don't wan't to.
Re: Prices for mutual funds. What do I pay?
Not back when I bought stocks. There was no internet, and I didn't have a ticker tape machine in my kitchen. Plus, when I bought a stock, it wasn't just for the next 20 minutes, it was for the next 2 or 20 years. Come to think if it, that's how I buy mutual funds.Dima wrote:
sscritic, with stocks it is different though, transaction is made quickly and you pay approximately the price you saw when you placed your order, or you can place a limit and you won't pay more than you don't wan't to.
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Re: Prices for mutual funds. What do I pay?
With market order, you have uncertainty with price. A concern if you're trading in an account like IRA where contributions are restrictedDima wrote:Of course I meant price per share.
sscritic, with stocks it is different though, transaction is made quickly and you pay approximately the price you saw when you placed your order, or you can place a limit and you won't pay more than you don't wan't to.
With limit order, you set a price but you have uncertainty about whether the trade will execute. Set the limit price too low and it may not execute.
With mutual funds, you set the total transaction cost and you know the trade will execute at next market close. You just don't know the NAV.
If you're interested in Vanguard index funds like Total Stock, Total International and Total Bond, you can look at the ETF shares to see how they're doing in the trading session to get some hints about what the mutual fund NAV may do. Total Stock Market ETF is VTI, Total International ETF is VXUS, Total Bond Market ETF is BND.
Last edited by DSInvestor on Tue Feb 04, 2014 10:32 am, edited 1 time in total.
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Re: Prices for mutual funds. What do I pay?
It usually takes VG about 2 hours to post the closing mutual fund NAVs to their site after each market close. If you really want a very close approximation just after the close, and you’re talking about a VG index fund that also has an ETF share class you can look at the closing ETF NAV change which will be available much sooner. The NAV change in the ETF shares and the NAV change in the mutual fund are very close, often exactly the same. Don’t look at the closing price on the ETF for comparison – that won’t work.
Yesterday:
VFWAX – FTSE Large Admiral – closing NAV was down 1.68% the ETF share class (VEU) NAV was down 1.69%
VFIAX – S&P 500 Admiral – closing NAV was down 2.29% as was VOO the ETF share class NAV
VGSLX – REIT Admiral – closing NAV was down 1.76% while VNQ the ETF share class NAV was down 1.75%
I’m not sure this information wildly useful….
Yesterday:
VFWAX – FTSE Large Admiral – closing NAV was down 1.68% the ETF share class (VEU) NAV was down 1.69%
VFIAX – S&P 500 Admiral – closing NAV was down 2.29% as was VOO the ETF share class NAV
VGSLX – REIT Admiral – closing NAV was down 1.76% while VNQ the ETF share class NAV was down 1.75%
I’m not sure this information wildly useful….
Re: Prices for mutual funds. What do I pay?
If you just want an approximation for something like Total Stock, you can look at what the S&P 500 is doing during the day. TSM (admiral) closed Friday at 45.24. The market was down 2% or more during the day. A rough estimate of the price you would pay for TSM if purchased before 4 pm EST yesterday was 45.24 x 0.98 = 44.34. As it was, you would have gotten a bargain as your price would have been 44.14, a 20 cent savings.DSInvestor wrote: If you're interested in Vanguard index funds like Total Stock, Total International and Total Bond, you can look at the ETF shares to see how they're doing in the trading session to get some hints about what the mutual fund NAV may do. Total Stock Market ETF is VTI, Total International ETF is VXUS, Total Bond Market ETF is BND.
Re: Prices for mutual funds. What do I pay?
Just saying that with stocks it is much easier, since I had experience with them (and I have a ticker tape machine in my kitchen ).
And I'm not talking about trading. I just though that I'm selling a fund for the price I see (I'm transferring my very first and not very successful test fund to Vanguard) but when the transaction happened, the fund's shares were 5% less. Was an unpleasant surprise. Now I know.
P.S. Thank you BBL, DSInvestor, I'm going to look in to it.
And I'm not talking about trading. I just though that I'm selling a fund for the price I see (I'm transferring my very first and not very successful test fund to Vanguard) but when the transaction happened, the fund's shares were 5% less. Was an unpleasant surprise. Now I know.
P.S. Thank you BBL, DSInvestor, I'm going to look in to it.
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Re: Prices for mutual funds. What do I pay?
IMO, it is easier to buy and sell mutual funds. No calculator required. If you want to buy $5000 of any fund, just enter a trade to buy $5000.Dima wrote:Just saying that with stocks it is much easier, since I had experience with them (and I have a ticker tape machine in my kitchen ).
And I'm not talking about trading. I just though that I'm selling a fund for the price I see (I'm transferring my very first and not very successful test fund to Vanguard) but when the transaction happened, the fund's shares were 5% less. Was an unpleasant surprise. Now I know.
P.S. Thank you BBL, DSInvestor, I'm going to look in to it.
If you wanted to buy $5000 of a stock or ETF, you must a) see if the market open b) check what it is trading at c) determine how many shares it would be to approximate $5000, d) decide on the type of order e) monitor whether the trade executes.
Mutual fund trades can be automated say to buy $1000 every month on the 5th of the month. This is not possible with stocks or ETFs.
Mutual fund distributions can be directed from one fund to another fund. When stocks are below target, I direct bond fund dividends to stock funds. When stocks are above target, I direct stock fund dividends to bond funds. This is not possible with stocks or ETFs.
What kind of account transfer did you do? My mom transfered an IRA from Amerprise to Vanguard and Ameriprise took a chunk out as a fee. This had nothing to do with mutual fund NAV, they just wanted a chunk? I believe the fee was a fixed fee so the smaller the IRA the bigger the percentage. If the fund is not available at both institutions, the holding may have to be sold at source, cash transfered to Vanguard, then vanguard fund purchased. If the investment was available at both institutions, transfer in-kind may have avoided time out of market and price differences.
Re: Prices for mutual funds. What do I pay?
It's a different issue. A few years ago, when I was learning about investing in mutual funds, I bough one through Sharebuilder. Now, when I know a bit more, I keep everything in Vanguard (VTSMX, VBMFX, VFIFX) where expenses are less, no fees and performance is better.DSInvestor wrote:IMO, it is easier to buy and sell mutual funds. No calculator required. If you want to buy $5000 of any fund, just enter a trade to buy $5000.
So, I wanted to sell my first fund and put the money in my VTSMX. I placed the order thinking I get the current worth, but after 4pm calculation it was 5% less.
I have been buying shares in mutual funds for a long time without carrying how much exactly I paid per share but have never sold them.
I've decided to learn how cost per share for mutual fund works.
Stocks and funds are different. I meant it is easier for me to determine the price per item I will pay. But it is easier to operate/invest with mutual funds for me, too. I have automatic transfers from my bank account twice a month and I don't monitor the price and don't worry about transaction costs.
P.S. Interesting nuance about re-directing dividends to other fund. I'll keep that in mind.
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Re: Prices for mutual funds. What do I pay?
Mutual funds particularly stock mutual funds are volatile. If you sold one stock fund to buy another stock mutual fund , both funds probably went down that day so it may have been a wash. At Vanguard this is called an exchange and there is no time out of market since the sell and buy happens after market close at NAV. If you wanted to exchange a stock or ETF, there would be some time between the sell and the buy transaction and lots of things can happen in trading session. Heck your limit order to buy may not even execute of what you want to buy shoots up in price.Dima wrote:It's a different issue. A few years ago, when I was learning about investing in mutual funds, I bough one through Sharebuilder. Now, when I know a bit more, I keep everything in Vanguard (VTSMX, VBMFX, VFIFX) where expenses are less, no fees and performance is better.
So, I wanted to sell my first fund and put the money in my VTSMX. I placed the order thinking I get the current worth, but after 4pm calculation it was 5% less.
I have been buying shares in mutual funds for a long time without carrying how much exactly I paid per share but have never sold them.
I've decided to learn how cost per share for mutual fund works.
VFIFX is Vanguard Target Retirement 2050. This fund holds Total Stock Market, Total International Stock Market, Total Bond Market and Total International Bond Market. Is there a reason that you're holding Total Stock VTSMX and Total Bond VBMFX as well? A target retirement fund that matches your stock/bond asset allocation may be the only fund you need assuming your portfolio is entirely in tax advantaged accounts. Hold it in all investment accounts if available. If you're in a high tax bracket and portfolio is held in both taxable and tax advantaged accounts, it may be better to use separate funds (VTSMX, VGTSX and VBMFX) rather than target retirement funds to allow you to place funds for tax efficiency.
Re: Prices for mutual funds. What do I pay?
VFIFX is my Traditional IRA. I put there my tax deferred savings. 2013 is my first year.
VTSMX, VBMFX are in taxable accounts. This is my 3-fund-portfolio to be. I'm in a small tax bracket and I have automatic bi-monthly investments (small amounts).
I'm planing 70%/30% allocation. 34 y.o. My plan is to accumulate money for my future (distant future) home.
VTSMX, VBMFX are in taxable accounts. This is my 3-fund-portfolio to be. I'm in a small tax bracket and I have automatic bi-monthly investments (small amounts).
I'm planing 70%/30% allocation. 34 y.o. My plan is to accumulate money for my future (distant future) home.
Re: Prices for mutual funds. What do I pay?
Dima: to see how your VTSMX is doing during the day, pull up its ETF class shares VTI on morningstar:
http://etfs.morningstar.com/quote?t=VTI
Apply the same price change you see to the closing price of VTSMX from the previous day. Or compute a price ratio, which tends to stay unchanged for long swaths of time, particularly once you move to Admiral shares which have the same expense ratio and won't lag the ETF over time.
Do take a look at the premium/discount and the bid/ask spread to get a measure of the uncertainty from market conditions; the smaller the more precise your estimation will be. The premium/discount number is not reliable for international funds, AFAIK because of the differences in market hours, and it might be best to ignore it for those.
For VBMFX, the ETF equivalent is BND. For VFIFX, there is none, although you can mix VTI/VXUS/BND in some ratios and arrive almost there, but I'd just say don't worry about it.
In general, this isn't very useful to me except when rebalancing -- if I were on the fence about doing it, i.e. the difference based on closing prices is barely enough to make it worth it, and I spot a large intraday move, it might sway my opinion either way.
http://etfs.morningstar.com/quote?t=VTI
Apply the same price change you see to the closing price of VTSMX from the previous day. Or compute a price ratio, which tends to stay unchanged for long swaths of time, particularly once you move to Admiral shares which have the same expense ratio and won't lag the ETF over time.
Do take a look at the premium/discount and the bid/ask spread to get a measure of the uncertainty from market conditions; the smaller the more precise your estimation will be. The premium/discount number is not reliable for international funds, AFAIK because of the differences in market hours, and it might be best to ignore it for those.
For VBMFX, the ETF equivalent is BND. For VFIFX, there is none, although you can mix VTI/VXUS/BND in some ratios and arrive almost there, but I'd just say don't worry about it.
In general, this isn't very useful to me except when rebalancing -- if I were on the fence about doing it, i.e. the difference based on closing prices is barely enough to make it worth it, and I spot a large intraday move, it might sway my opinion either way.
Re: Prices for mutual funds. What do I pay?
Normally that doesn't happen unless the market made a big move during the day. To have more control on the price, buy/sell just before 4:00, while watching what the market is doing. If the S&P500 is up/down 3% for the day, it is likely that VTSMX will also end up/down somewhere close to 3% (as sscritic mentioned previously).Dima wrote: So, I wanted to sell my first fund and put the money in my VTSMX. I placed the order thinking I get the current worth, but after 4pm calculation it was 5% less.
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Re: Prices for mutual funds. What do I pay?
But sometimes it works the other way, and you end up 5% ahead of where you thought you were.Dima wrote: So, I wanted to sell my first fund and put the money in my VTSMX. I placed the order thinking I get the current worth, but after 4pm calculation it was 5% less.
The surest way to know the future is when it becomes the past.
Re: Prices for mutual funds. What do I pay?
Generally I'm not. The first fund is gone and I'm not going to sell anything else for now. Just wanted to know how it's calculated. But it actually may be useful for my future sells.ogd wrote:...but I'd just say don't worry about it.
Thank you, this is very helpful.
Re: Prices for mutual funds. What do I pay?
Not with my luck.cheese_breath wrote:But sometimes it works the other way, and you end up 5% ahead of where you thought you were.
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Re: Prices for mutual funds. What do I pay?
I know, if it wasn't for bad luck we wouldn't have any luck at all.Dima wrote:Not with my luck.cheese_breath wrote:But sometimes it works the other way, and you end up 5% ahead of where you thought you were.
The surest way to know the future is when it becomes the past.
Re: Prices for mutual funds. What do I pay?
Dima, it has been quite awhile since VTSMX dropped 5% in one day. It dropped about 2.4% yesterday, which I think was the largest one-day drop since last June.
Anyway, as others have said, you can look at the intraday % change in price of VTI, which is the ETF share class of VTSMX, shortly before 4pm Eastern time to estimate the one-day change in NAV of VTSMX.
I have a Google spreadsheet that shows % change for a number of ETFs that correspond to mutual funds I own. I color-code the cells, so at a glance I can see whether the share prices are up or down a little or a lot. Normally I don't act on this, but if I am close to a rebalancing band, large one-day moves may trigger some closer evaluation of buying and/or selling. The deeper shades of red showed me at a glance yesterday that "the market" was down more than a typical daily move, but I'm not close to any rebalancing moves, so the only result was "oh, the market is down nicely today".
Kevin
Anyway, as others have said, you can look at the intraday % change in price of VTI, which is the ETF share class of VTSMX, shortly before 4pm Eastern time to estimate the one-day change in NAV of VTSMX.
I have a Google spreadsheet that shows % change for a number of ETFs that correspond to mutual funds I own. I color-code the cells, so at a glance I can see whether the share prices are up or down a little or a lot. Normally I don't act on this, but if I am close to a rebalancing band, large one-day moves may trigger some closer evaluation of buying and/or selling. The deeper shades of red showed me at a glance yesterday that "the market" was down more than a typical daily move, but I'm not close to any rebalancing moves, so the only result was "oh, the market is down nicely today".
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Prices for mutual funds. What do I pay?
Thank you Kevin, VTSMX is the fund I'm going to put the money in, I didn't sell it.
Thank you all for you input. After all, you actually can (kind of) see performance of a fund in real time.
https://www.google.com/finance?q=NYSEARCA:VTI
Thank you all for you input. After all, you actually can (kind of) see performance of a fund in real time.
https://www.google.com/finance?q=NYSEARCA:VTI
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Re: Prices for mutual funds. What do I pay?
Well, so Dima, it's all personal taste... If you are familiar with stocks and like the way stock purchases work, then--like most people who are familiar with stocks and like the way stock purchases work--why not use ETFs?
Particularly since Vanguard offers most of its index funds as both mutual funds and ETFs.
Particularly since Vanguard offers most of its index funds as both mutual funds and ETFs.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Prices for mutual funds. What do I pay?
nisiprius, there was misunderstanding. I don't prefer stocks. I needed to sell one fund once, I'm not in to trading. When I learn more, I may look into ETFs. I've heard both mutual funds and ETFs have cons and pros.
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Re: Prices for mutual funds. What do I pay?
There's very little difference really. People exaggerate the difference. A good quick summary is at ETFs vs. mutual funds. I prefer mutual funds myself, but with ETFs you can place market orders that execute very quickly at close to a known price; limit orders that put bounds on what the price can be; etc.Dima wrote:nisiprius, there was misunderstanding. I don't prefer stocks. I needed to sell one fund once, I'm not in to trading. When I learn more, I may look into ETFs. I heard both mutual funds and ETFs have cons and pros.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: Prices for mutual funds. What do I pay?
This is a great discussion, I had a lot of the same questions about mutual funds as the OP but this thread has answered nearly all of them. That said, does anybody know if Vanguard charges any transaction fees when you buy, sell, or exchange one of their funds? Also, is there a minimum time in which you must hold onto a fund before selling it?
Re: Prices for mutual funds. What do I pay?
Most funds don't have fees, but a few funds have purchase and/or sales fees. Easy to find.Classic Muscle wrote:This is a great discussion, I had a lot of the same questions about mutual funds as the OP but this thread has answered nearly all of them. That said, does anybody know if Vanguard charges any transaction fees when you buy, sell, or exchange one of their funds? Also, is there a minimum time in which you must hold onto a fund before selling it?
No minimum time to hold a fund, but VG has a frequent trading policy which for some funds supposedly doesn't allow you to purchase shares online or by phone for 60 days after you sell, but there is a workaround for online, and the restriction doesn't apply to purchases by mail.
Kevin
If I make a calculation error, #Cruncher probably will let me know.
Re: Prices for mutual funds. What do I pay?
nisiprius, no fractional shares and problematic automatic investments is a turn off for me.
ETF's are probably better for those who work with periodical lump sum investments. Those who invest a percentage from their paycheck on automatic basis, are better off with mutual funds. Is it so?
ETF's are probably better for those who work with periodical lump sum investments. Those who invest a percentage from their paycheck on automatic basis, are better off with mutual funds. Is it so?
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Re: Prices for mutual funds. What do I pay?
The problem with manually trading ETFs periodically is that you have to look to see what what the market or ETF is doing before you place the trade - what's the share price so you can determine how many shares to trade? Every time you have to look, it is an opportunity for something to make you nervous to second guess yourself. This is particularly important if you're investing without an investment plan or investment policy statement.Dima wrote:nisiprius, no fractional shares and problematic automatic investments is a turn off for me.
ETF's are probably better for those who work with periodical lump sum investments. Those who invest a percentage from their paycheck on automatic basis, are better off with mutual funds. Is it so?
With automated trades, you've set in motion a plan to buy funds every month, quarter or other interval, no matter what market conditions may be. If you automate purchases into asset allocation funds like Target Retirement or LifeStrategy (that match your desired asset allocation), your contributions (big or small) will be deployed in a way that maintains your asset allocation no matter what the market is doing. It helps you stick to your investment plan to maintain AA and maintain steady contributions.
Even if you want to manually trade a mutual fund, you can do so without looking up a share price (as you have done in the past). You just buy $5000 of fund X and that's it.