Best Time to Sell Mutual Fund? E No Matter

No be any particular time of day dey best to sell mutual fund. Mutual funds dey use forward pricing: every redemption request wey fund accept before its daily cutoff, normally 4:00 p.m. ET, go fill at the same net asset value wey dem strike after market close. So, order wey person enter at 10:05 a.m. and another wey e enter at 3:55 p.m. go receive identical price. The timing wey fit cost real money na when person miss cutoff. And normally, na your broker cutoff dey bind you, no be the fund own.

How forward pricing dey remove clock from the decision

Forward pricing na rule for US fund regulation, no be house convention. Order to buy or redeem fund shares go receive the next NAV wey fund calculate after the order arrive. E no go ever receive the last NAV wey fund publish. Suppose fund print $42.18 at yesterday close. Nobody fit redeem at $42.18 today, any time of day, no matter wetin market do in between. Every order wey fund collect during the day enter the same pool and dem price all of them together after close.

That one daily strike na wetin flatten the trading day for seller. The mechanics of the strike dey covered for how mutual fund NAV dey calculated, while the journey from order ticket to executed trade dey for when mutual funds dey trade. The main point here narrow: as long as order enter before cutoff, the hour wey you press the button no affect your price.

Wetin the clock worth when price dey move

Exchange traded fund na useful control group. SPY, the oldest ETF wey dey track S&P 500, dey price continuously throughout the session, so seller need choose a moment. The panel below measure how far SPY trade from that same day first print and from that same day closing print, minute by minute across the trailing year of sessions. Dem average the results into half-hour buckets for New York clock.

WITH bars AS
(
    SELECT
        toDate(toTimeZone(window_start, 'America/New_York'))  AS session_day,
        toTimeZone(window_start, 'America/New_York')          AS et,
        toFloat64(close)                                      AS px
    FROM global_markets.delayed_stocks_minute_aggs
    WHERE ticker = 'SPY'
      AND window_start >= today() - 370
      AND window_start <  today() - 2
      AND (toHour(toTimeZone(window_start, 'America/New_York')) * 60
           + toMinute(toTimeZone(window_start, 'America/New_York'))) >= 570
      AND (toHour(toTimeZone(window_start, 'America/New_York')) * 60
           + toMinute(toTimeZone(window_start, 'America/New_York'))) <  960
),
anchors AS
(
    SELECT
        session_day,
        argMin(px, et) AS open_px,
        argMax(px, et) AS close_px
    FROM bars
    GROUP BY session_day
)
SELECT
    formatDateTime(toStartOfInterval(b.et, INTERVAL 30 MINUTE), '%H:%i') AS et_time,
    round(avg(abs(b.px / a.close_px - 1)) * 100, 3)                      AS avg_gap_to_close_pct,
    round(avg(abs(b.px / a.open_px  - 1)) * 100, 3)                      AS avg_gap_to_open_pct
FROM bars AS b
INNER JOIN anchors AS a ON a.session_day = b.session_day
GROUP BY et_time
ORDER BY et_time

For the 09:30 bucket, average distance from the price wey the day later close at measure 0.463%. Distance from that morning first print measure 0.136%. By the 15:30 bucket, the numbers don move the other way: 0.091% from close and 0.501% from open. The two lines cross somewhere around the middle of the session.

Every point for that chart na different fill for the same seller on the same day. Choosing between them na the ETF seller problem. E be one line inside the wider mutual funds versus ETFs comparison. For mutual fund, the whole chart collapse to one point wey dem strike after 4:00 p.m. That collapse na the main feature.

Your broker cutoff dey earlier than the fund own

The fund cutoff na the time wey e stop accepting orders for today NAV, usually 4:00 p.m. ET, when regular US trading dey close. Your broker no be the fund. E collect orders from thousands of clients, batch them and pass them forward. The internal deadline for that batch dey before 4:00 p.m.

Cutoffs between 3:00 p.m. and 4:00 p.m. ET common for big US brokerages. Four situations fit push the deadline earlier:

• Omnibus accounts. When your broker hold one position for the fund on behalf of every client wey own am, your order become one line inside a single aggregated submission. The house deadline to join that submission fit dey hours before the fund own.
• Retirement plans. Workplace plan put recordkeeper between you and the fund, and that recordkeeper get earlier deadline.
• Phone and paper orders. Anything wey human key in for your behalf get earlier deadline than online entry.
• Particular fund families. Some funds set cutoff before 4:00 p.m. ET for their own prospectus. Money market and international funds na the usual places to find this kind cutoff.

Order wey person enter at 3:58 p.m. when house deadline na 3:30 p.m. go price at next day NAV, no matter wetin the confirmation screen show at that time.

Missing cutoff mean one extra day of market exposure

Order wey arrive late no mean say dem reject am. E go price at the next NAV, one trading day later. That one mean say you hold the fund through one extra overnight and one extra full session. The panel below arrange every session since the beginning of 2016 by how far S&P 500 tracker move from one close to the next. Na the same close-to-close change wey broad index fund NAV dey record.

SELECT
    move_bucket,
    round(count() * 100.0 / sum(count()) OVER (), 1) AS frequency_pct
FROM
(
    SELECT
        multiIf(move_pct < 0.25, 'under 0.25%',
                move_pct < 0.50, '0.25% to 0.50%',
                move_pct < 1.00, '0.50% to 1.00%',
                move_pct < 2.00, '1.00% to 2.00%',
                'over 2.00%') AS move_bucket,
        move_pct
    FROM
    (
        SELECT abs(close_px / prior_close - 1) * 100 AS move_pct
        FROM
        (
            SELECT
                date,
                max(toFloat64(close)) AS close_px,
                lagInFrame(max(toFloat64(close)))
                    OVER (ORDER BY date ASC ROWS BETWEEN 1 PRECEDING AND CURRENT ROW) AS prior_close
            FROM global_markets.stocks_daily_aggs
            WHERE ticker = 'SPY'
              AND date >= '2016-01-01'
              AND date <  today() - 2
            GROUP BY date
        )
        WHERE prior_close > 0
    )
)
GROUP BY move_bucket
ORDER BY min(move_pct) ASC

30.5% of those sessions fall inside the under 0.25% bucket. The market quiet enough there, so one-day delay barely show for redemption. 6% fall inside over 2.00%, where one-day delay move the proceeds by noticeable amount. You no fit know which kind day you go land on when you place order. Na why e better make you know the cutoff.

The size of that extra day also depend on wetin the fund hold. The next panel average the absolute one-day change across six widely held funds since the beginning of 2021.

SELECT
    symbol,
    round(avg(move_pct), 3) AS avg_daily_move_pct
FROM
(
    SELECT
        symbol,
        abs(close_px / prior_close - 1) * 100 AS move_pct
    FROM
    (
        SELECT
            ticker                AS symbol,
            date,
            max(toFloat64(close)) AS close_px,
            lagInFrame(max(toFloat64(close)))
                OVER (PARTITION BY ticker ORDER BY date ASC ROWS BETWEEN 1 PRECEDING AND CURRENT ROW) AS prior_close
        FROM global_markets.stocks_daily_aggs
        WHERE ticker IN ('SPY', 'QQQ', 'IWM', 'EFA', 'TLT', 'GLD')
          AND date >= '2021-01-01'
          AND date <  today() - 2
        GROUP BY ticker, date
    )
    WHERE prior_close > 0
)
GROUP BY symbol
ORDER BY avg_daily_move_pct ASC

The calmest of the six, SPY, average 0.755% per session. The busiest, IWM, average 1.099%. Missing cutoff on bond fund and missing cutoff on small-cap fund na the same mistake, but the prices fit differ well well.

Trade date dey move together with NAV date. This one matter at tax year end. Redemption wey person enter after cutoff on the last business day of December go price on the first business day of January and get that January trade date. Selling mutual funds at a loss cover the loss side of that calendar. The cash timeline wey start after NAV strike na separate clock, and mutual fund settlement time cover am.

International funds, stale prices and fair value pricing

Fund wey hold Japanese or European shares face one problem at 4:00 p.m. ET: the last traded prices of those holdings don old for hours. Tokyo close around 2:00 a.m. ET. London close around 11:30 a.m. ET. If fund strike NAV from those stale closing prices, buyer fit trade at price wey ignore everything US session don print since then. Regulators call this practice time zone arbitrage.

Fair value pricing na the standard answer. The fund board apply model wey read index futures, ADR prices, sector moves and currency shifts after the foreign market close. Then e adjust the stale prices toward estimate of fair value as of 4:00 p.m. ET. Two things follow for seller. The NAV wey you receive na modeled estimate, no be simple sum of last prints. And e fit stay some distance from wetin Tokyo closing prices imply.

The first panel don already show the gap wey the model need fill. For the 11:30 bucket on New York clock, around the time London finish for the day, SPY still dey average 0.31% away from where e go close. Every basis point of that na US-session information wey European holding last traded price never see.

None of this give seller intraday choice. The adjustment enter the one NAV of the day, at the one time wey fund strike am.

Where you fit find your own cutoff

Five places get the answer, roughly according to how much dem bind you:

1. Your broker mutual fund trading disclosure, or its commission and fee schedule. Search the page for cutoff, or for the phrase same business day. Na this deadline dey govern your order.
2. The order ticket itself. Most brokers print expected pricing date on the review screen before you submit. Check whether e name today or the next business day.
3. The fund prospectus, under heading like How to sell shares or Pricing of fund shares. Na the fund own cutoff be this. Your broker deadline must fall inside am.
4. Your retirement plan service page, if the account na 401(k) or similar. Recordkeeper deadlines dey earlier than brokerage deadlines most times.
5. The trade desk, for phone or paper orders. Ask on quiet day, no be the day wey you need the answer urgently.

FAQ

Does time of day matter when selling mutual fund?

E no matter if you enter before cutoff. Every redemption wey fund accept before daily deadline receive the same NAV. So 10:05 a.m. and 3:55 p.m. produce the same price. The only timing wey change your price na when you fall on the wrong side of the deadline.

Wetin happen if I sell mutual fund after cutoff?

Dem no go reject the order. E go price at the next NAV wey fund strike, normally at the close of the next business day, and the trade date go move with am. You go hold the fund through one extra overnight and one extra session before dem set the price.

Why my broker cutoff dey earlier than 4:00 p.m. ET?

Brokers dey batch client orders and pass them to the fund or through clearing system before their own internal deadline. Omnibus arrangements, where broker hold one aggregated position at the fund, and retirement plan recordkeepers both push the deadline earlier, sometimes by hours.

International mutual funds dey price at different time?

Dem strike one NAV per day at 4:00 p.m. ET, just like any other US fund. When the underlying markets close hours earlier, fund apply fair value pricing and adjust those stale closing prices with US-session information. So the published NAV na modeled estimate, no be sum of last prints.

Selling ETF different from selling mutual fund?

Yes. ETF dey trade continuously, so price depend on when your order fill and the spread at that moment. Mutual fund get one price per day, and every seller wey enter before cutoff receive that price.

SELECT
    year,
    round(avg(overnight_pct), 3) AS overnight_move_pct,
    round(avg(intraday_pct), 3)  AS intraday_move_pct
FROM
(
    SELECT
        toYear(date)                             AS year,
        abs(open_px / prior_close - 1) * 100     AS overnight_pct,
        abs(close_px / open_px - 1) * 100        AS intraday_pct
    FROM
    (
        SELECT
            date,
            max(toFloat64(open))  AS open_px,
            max(toFloat64(close)) AS close_px,
            lagInFrame(max(toFloat64(close)))
                OVER (ORDER BY date ASC ROWS BETWEEN 1 PRECEDING AND CURRENT ROW) AS prior_close
        FROM global_markets.stocks_daily_aggs
        WHERE ticker = 'SPY'
          AND date >= '2021-01-01'
          AND date <  toStartOfYear(today())
        GROUP BY date
    )
    WHERE prior_close > 0 AND open_px > 0
)
GROUP BY year
ORDER BY year

Every panel here come with the SQL wey produce am. Open any one and all the counting dey there. You fit ask the same questions in plain English on the Strasmore terminal.