A stock price reflects an actual sale, a trade of shares between a seller and buyer on some public securities market. A net asset value, or NAV, is the worth of one share in a mutual fund, which holds many securities. Investors use both figures to calculate the value of their investment portfolios and assess buying and selling strategies. Both figures are reported daily in newspapers and other publications and various security reporting forums.
Stock prices are reported trade by trade by the New York and American Stock Exchanges and the NASDAQ trading system. Each maintains a "ticker" or electronic reporting system serving stockbrokers and media outlets. Every trade is recorded, with the number of shares exchanged and the per-share price. Stocks usually are traded in 100-share blocks, but prices are always reported per share.
Market reporting services collect trades in computer systems and periodically compile tables showing the total number of shares sold, the price per share and the change from the previous report. Most also show daily or yearly highs and lows. "Closing" tables are compiled at the end of the trading day, 4 p.m. New York time, but some reports also follow "after hours" trades, which take place after the exchanges quit for the day.
Each mutual fund buys and sells shares of securities and calculates their value at the end of the trading day. Funds are required by the Securities and Exchange Commission to report the net asset value at the end of the day. This is the number of shares held in the mutual fund divided into the total net worth of the fund's assets -- the value of all stocks, cash and other assets, reduced by any management fees or other liabilities.
An investor buys a mutual fund share at the previous day's net asset value. Mutual funds usually are bought by total price, not per share, while stocks are always bought by number of shares. Funds do not have a fixed number of shares, like stocks, so the number of shares fluctuates with investments. The price a fund holder gets when he redeems a share is based on the NAV, minus any fees the fund charges.
Stock prices are pure supply and demand. When more investors want a stock, the price goes up, but trades are always negotiated between a buyer and a seller. The New York Stock Exchange uses a system of specialists to control trading, done by stock brokerage representatives on a trading floor, so supply and demand do not get overbalanced. NASDAQ is an electronic exchange, where buy and sell orders are matched and trades recorded electronically.
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