In the last two sessions, we discussed what a mutual fund is and we reviewed some of the advantages and disadvantages of owning these funds. In this session you will learn how to keep track of a mutual fund.
Every financial asset is bought or sold at a certain price.
For a mutual fund, this price is called net asset value or NAV for short. The NAV is derived by taking the total value of all of a fund's holdings at any one time and dividing that sum by the number of shares outstanding. NAV is the value of one share of the fund. Although this is an important number to know, there are other numbers that you should be aware of. Dividends, dividend yield, and capital gains distributions are three terms you should get to know very well.