Old guy in FL is right - the closing price of each stock (at 4 p.m.) is used to calculate the NAV of the mutual fund share. Stock portfolio value divided by the number of mutual fund units existing - based on the closing price per share multiplied by volume of each share owned by the mutual fund Therefore the mutual fund has only one price per day for both buying and selling.

If at 9 a.m. the next morning -. one of the major holdings in the mutual fund announces very bad quarter results or announces that it's being taken over at a much higher price - the NAV value will not reflect this news until after the close at 4 p.m. An ETF will reflect the same news in a matter of seconds of the market opening as investors bid down or bid up the value of the ETF to reflect the change in the value of one of its major holdings.

Mutual funds can be open-ended or closed-ended. Closed -ended, like an investment trust will fluctuate price wise on supply and demand. Although consideration should be given to whether the assets owned are at a discount or premium to the share price. With open ended it is different as new money will be added (bought) and old units cancelled (sold). In this case the price is based on Net Asset Value of the underlying assets and there is no supply and demand pressure (well there is slightly because the managers will push the price up or down relative to the NAV. I.e. they will make it slightly more attractive to buyers when necessary or to sellers when necessary.

ETFs are traded in the market and thier price will more or less follow the value of the underlying assets (they track their underlying).

Mutual funds are determined by the value of the investments (stocks, bonds, etc.) However, since they can be quite large and have thousands of underlying securities, they are only priced once a day after market close. ETF's on the other hand, are similar (management, underlying investments etc) but trade the same as stocks. So those prices do fluctuate throughout the day. Some sites will give two prices for ETF's, NAV and share price. NAV is the actual value of the funds assets, while share price is what they are trading for on the open markup. ETF's can trade at par, a premium or discount. Traditional mutual funds are priced daily, so you will not know how many actual shares you will get (if buying) or what the value you will receive (if selling) until after the close of business day.

It's like a bundle of stocks.

Go to a website having a financial "glossary"

Unlike stocks, where prices are moved by the supply and demand forces of the marketplace, mutual fund prices are determined by the value of the underlying securities in the fund.

I don't exactly understand the difference here. Could someone please explain this to me?

Thanks!