What is Forward Pricing?
How Does Forward Pricing Work?
For example, let's say you place an order today to buy $100 worth of mutual fund XYZ this morning. Last night, XYZ had a net asset value (NAV) of $10 per share. Your transaction will probably not happen at the NAV price of $10, because the mutual fund company must comply with forward pricing rules.
Because a mutual fund's NAV is recalculated after the market has closed for the day, you will end up buying the shares at the forward price, or the end-of-trading day's NAV price. Assume that after the market closes today, mutual fund XYZ's NAV price is recalculated and the new NAV price is $8. The $100 order that you placed earlier today will end up buying 12.5 shares at $8 per share instead of 10 shares at $10 per share.