Net Asset Value (NAV)
What Is Net Asset Value (NAV)?
Net asset value (NAV) represents the total value of a fund’s assets minus its liabilities, divided by the number of shares outstanding.
NAV is commonly used to determine the price of shares in mutual funds.
Why It Matters
NAV helps investors understand the value of each share of a mutual fund or investment fund. Because mutual fund shares are priced based on NAV, it determines the price investors pay when buying or selling fund shares.
Monitoring NAV helps investors evaluate fund performance.
How NAV Works
NAV is calculated using the following components:
- total market value of fund holdings
- minus fund liabilities
- divided by shares outstanding
Mutual funds calculate NAV once per trading day after markets close.
Example
A mutual fund holds assets worth $200 million and has $10 million in liabilities. If the fund has 19 million shares outstanding, the NAV would be approximately $10 per share.
NAV vs Market Price
- NAV determines the price of mutual fund shares.
- Market price refers to the price of securities traded throughout the day in exchanges.
FAQs About NAV
Do ETFs use NAV?
Yes, but ETF shares trade at market prices that may slightly differ from NAV.
When is NAV calculated?
Usually once per day after markets close.
Does NAV reflect investment performance?
Yes. Changes in NAV reflect gains or losses in the fund’s holdings.
Related Terms
