Mutual Fund Closing Price

[David S. Anderson]

How are the dividend purchase prices of mutual funds calculated? I noticed that on 7/02/2007 my DODIX, held at Vanguard, was reivnested at 12.3800 per share but the closing price according to Big Charts and Yahoo (hist) was 12.43. Can anyone explain this?

Thanks

[Mark]

Hi David,

I'm not sure of the intricacies here. It is probably best to confirm with the mutual fund company, but I'll say how I think it works. It makes sense to me that you would purchase at the price of the fund after the dividend was paid. This may very well be different than the closing price the next day. For example:

- Day 1 Close: $10/share
- Dividend/Share paid at close of Day 1 for $1/share
- Fund Price after dividend is then $9/share, which is where you buy reinvested shares
- Day 2 starts at $9/share, but will most likely close at some other price.

In the above example, you can see that the fund never actually closes at the price you buy reinvested shares.

Fund Manager simply records the purchase price as recorded by the mutual fund company when retrieving transactions.