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Why You Can’t Trade Now

As stocks keep falling, mutual fund investors looking to bail are out of luck. Unlike investors in individual stocks or exchange-traded funds — which can be bought and sold throughout the day at real-time prices — mutual fund trades don’t go through until after the market closes at 4 p.m. EST, with prices set at the day’s close. If, for example, you place an order to sell a mutual fund at noon, when the net asset value is $15, the trade won’t be executed until the end of the day at which point, the price could be higher or lower than when you pulled the trigger.

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This means millions of antsy fundholders are stuck watching the markets rise and fall, and there’s nothing they can do about it. Some 51 million households own mutual funds, according to the Investment Company Institute, a mutual fund industry trade group. Mutual funds are also the investment of choice for 401(k) plans, which hold the lion’s share of Americans’ retirement assets.

For investors who are determined to sell (or buy), doing so as close to the market close as possible will offer a better idea of the final price. However, many investing pros say regular investors in mutual funds and 401(k)s shouldn’t be worried about day-to-day swings. “The stock market is for money you’re not using for 15 years,” says T. Rowe Price Financial adviser Stuart Ritter. Money you need within the next two years or so shouldn’t be in stocks to begin with, he says.

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