What is the Share Price (NAV) I'm buying at?

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What is the Share Price (NAV) I'm buying at?

Post by MartN » Wed Mar 25, 2020 3:13 pm

Newbie question:

I have VTTSX Roth, and I usually contribute to it on a weekly basis via automatic contribution, so I never had to think about share price.

However, the other day (Monday) I went to buy a big chunk at once, around 2pm EST. At that point, the share price of the fund was listed as 26.93. I bought, and then received a transaction submission the next day (Tuesday) which listed the share price that I bought in at as 29.02. Obviously this was higher than the 26.93 listed when I bought. My guess is that 29.02 was the NAV calculated after the market closed on Monday, even though my purchase was

So is it the case that when I buy shares on any weekday before the market closes (4pm EST), I actually don't know what share price I'm purchasing at until the market closes and Vanguard re-calculates the NAV? If that's the case, the listed share price during the trading day is sort of meaningless. Vanguard customer service is about 45 minutes at present so I can't get an answer that way.

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Re: What is the Share Price (NAV) I'm buying at?

Post by oldcomputerguy » Wed Mar 25, 2020 3:52 pm

Welcome to the forum.

Yes, whenever you buy a share of a mutual fund, the price at which you buy is the price calculated at the end of the day's trading. This is not just with Vanguard, it's a facet of mutual funds in general. This is one of the biggest differences between mutual funds and ETF's (exchange-traded funds). ETFs trade like stocks do, so their share price fluctuates throughout the day just like stock prices do.

You might find this article from the Bogleheads wiki informative.
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Re: What is the Share Price (NAV) I'm buying at?

Post by Geologist » Wed Mar 25, 2020 6:01 pm

The prospectus for the Target Date Funds (it generally helps to give the name of the fund you are referring to because most people on this board have not memorized tickers) describes how purchases are made on p. 103-105. Specifically p. 104 says that "your purchase will be executed using the NAV as calculated on the trade date." The NAV of the trade date is only determined after the markets close (the $26.93 is the NAV for the previous trade date).

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Re: What is the Share Price (NAV) I'm buying at?

Post by alex_686 » Wed Mar 25, 2020 6:05 pm

Welcome to Bogleheads.

As a former mutual fund account I can say that you are buying at a blind price. The NAV is struck at the end of the day and all transactions occur that that price.

From here we can get into as much nuance as you like. The NAV system is a strong robust system. I have a slight preference for ETFs. You can get live prices for ETFs. This is not the reason why I favor them.

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