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What You Need To Effectively Price Mutual Funds

There is essentially one formula you must know which has three variations. The formula is NAV / Com = POP, where NAV is Net Asset Value, Com is Compliment and POP is the Public Offering Price of a mutual fund. Essentially, NAV is the total amount of assets within the mutual fund divided by the number of shares. POP is how much an investor has to pay for it and commission is built into this. Compliment is 1 minus the sales charge and can also be written as 100% minus sales%.

An example might help:

So ABC Fund has a NAV of $10.57 and a 4.5% sales charge or load. What is the POP? Using the above formula of NAV/Com=POP, we take $10.57 and divide it by the Compliment. To get the Compliment subtract 0.045 (4.5%) from 1, or take 100 - 4.5 and make it a percent. Either way you will come up with 95.5%. So, we end up with a formula of $10.57 divided by 95.5%. Make sure you convert the ending number to a percent.

Now that you have the basic formula down, here are the variations and their uses:

  • NAV / Com = POP (When you have the NAV and the Compliment you can easily find a mutual funds POP with this)
  • POP * Com = NAV (When you have the POP and the Compliment, you can find the NAV of a mutual fund)
  • NAV / POP = Com ( To find a sales charge percentage use this formula when you have the NAV and the POP)

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