What is NAV (net asset value)?
In one line: NAV, or net asset value, is a fund's assets minus its debts, divided by its number of shares, giving the value of one share.
A simple example
A fund owns a basket of stocks or bonds. NAV tells you what one share of that basket is worth.
The formula is short:
- Add up everything the fund owns. Say $105 million.
- Subtract what it owes, like fees due. Say $5 million.
- Divide by the number of shares. Say 4 million shares.
NAV = ($105M − $5M) ÷ 4M = $25 a share.
Why it matters
For a Mutual fund, NAV is the price. The fund works it out once a day, after the market closes. Every buy or sell order placed that day gets that day's NAV.
An ETF works differently. It trades on an exchange all day, like a stock. Its market price can drift a little above or below NAV. Big trading firms can create or redeem ETF shares, and that tends to keep the gap small for widely traded ETFs.
When an ETF trades above NAV, it's at a "premium." Below, a "discount." For smaller or thinly traded funds, that gap can be wider.
A common mistake
Thinking a low NAV means a fund is "cheap." A $10 NAV isn't a better deal than a $100 NAV. It just means the fund split its assets into more shares. What matters is what the fund holds, what it charges (its Expense ratio) and whether it fits your plan.
A fund's NAV also drops when it pays out a Dividend or distribution. The money leaves the fund and goes to you, so nothing was lost.
Questions
When is NAV calculated?
Most US mutual funds calculate it once each business day, after the market closes at 4:00 pm ET.
Is NAV the same as an ETF's price?
Not exactly. An ETF's price is set by trading during the day. It usually stays close to NAV but can be a little above or below.
Does a higher NAV mean a better fund?
No. NAV is just the value per share. Compare funds by what they hold, their fees and how they've behaved over time.
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