NAV (Net Asset Value)

Net Asset Value (NAV) represents the per-share market value of a mutual fund, ETF, or closed-end fund. It's calculated at the end of each trading day by taking the total value of all the fund's holdings, subtracting liabilities, and dividing by the number of outstanding shares.

NAV Calculation: NAV = (Total Assets - Total Liabilities) / Shares Outstanding

Components of Total Assets:

• Market value of all securities held
• Cash and cash equivalents
• Accrued income (dividends, interest)
• Receivables

NAV for Different Fund Types:

Mutual Funds:

• Calculated once daily after market close (4:00 PM ET)
• All buy/sell orders execute at that day's NAV
• NAV is the actual transaction price

ETFs:

• NAV calculated daily, but ETFs trade at market price throughout the day
• Market price can differ from NAV (premium or discount)
• Authorized participants arbitrage these differences

Closed-End Funds:

• NAV calculated daily
• Often trade at persistent discounts to NAV
• No creation/redemption mechanism to close the gap

Why NAV Matters:

1. Mutual fund pricing — determines buy/sell price
2. ETF valuation — helps identify if ETF trades at fair value
3. Performance tracking — NAV changes reflect fund performance
4. Fund comparison — NAV per share helps compare funds (though total return matters more)

Common Misconception: A $50 NAV fund is NOT "cheaper" than a $200 NAV fund. NAV is just the per-share price — what matters is the fund's total return and expense ratio, not its share price.