Net Asset Value (NAV)

Net Asset Value, or NAV, is the price per unit of a mutual fund or ETF. It’s calculated by taking the total value of everything the fund owns (stocks, bonds, cash), subtracting any liabilities (fees, expenses), and dividing by the number of units outstanding.

How it works

For mutual funds, the NAV is calculated once per day after the market closes. When you buy or sell a mutual fund, you get the NAV from that day’s close. You won’t know the exact price until after the transaction is processed.

ETFs also have a NAV, but because they trade on a stock exchange throughout the day, their market price can be slightly different from the NAV at any given moment. The difference is usually small for popular ETFs, but it can be wider for less-traded ones.

Why it matters

NAV helps you understand what a fund’s units are actually worth based on its holdings. For mutual fund investors, it’s the price you pay and the price you receive when you sell.

For ETF investors, comparing the market price to the NAV can tell you whether you’re paying a slight premium or getting a slight discount. Most of the time this difference is negligible, but it’s worth being aware of. A large gap between the market price and NAV can be a sign of low trading volume or unusual market conditions.

A concrete example

Say a fund holds $500 million in stocks and bonds, has $2 million in expenses, and has 20 million units outstanding. The NAV would be ($500M - $2M) / 20M = $24.90 per unit. If you own 400 units of this fund, your holdings are worth $9,960 based on the NAV. For a mutual fund, that’s the exact price you’d get if you sold today after the market closes.