Forward pricing

Forward pricing is the rule under which mutual fund orders are executed at the next net asset value calculated after the order is received, rather than at a price known in advance. This is different from how stocks and ETFs trade, where an investor sees a live, constantly updating price and knows exactly what they will pay before placing an order.

Mutual funds calculate their net asset value once per trading day, typically after the major US stock exchanges close. An order to buy or sell mutual fund shares placed at any point before that daily cutoff is filled at the net asset value calculated at the end of that same trading day, while an order placed after the cutoff is filled at the following day's closing net asset value instead. This means an investor placing a mutual fund order during market hours does not actually know the exact price they will pay or receive until after the market closes and the fund calculates its NAV.

Forward pricing exists to prevent investors from using stale, already known prices to trade mutual funds unfairly against other shareholders, since without it, someone could place an order based on information that arrived after the fund's last price was set but before it was recalculated. It is one of the structural reasons some investors prefer ETFs for situations where knowing the exact execution price in advance matters, since ETFs trade continuously at live market prices throughout the day.