Net Asset Value (NAV)
Net asset value (NAV) is the per-share value of a mutual fund or ETF, calculated by dividing total assets minus liabilities by the number of shares outstanding. Mutual funds are priced once daily at NAV; ETF shares trade throughout the day at market prices that may differ slightly from NAV.
NAV = (Total assets − Liabilities) ÷ Shares outstanding. For a mutual fund with $500M in securities, $5M in liabilities, and 50 million shares, NAV = $9.90 per share.
When you buy or redeem mutual fund shares, you transact at the next calculated NAV (end of day). ETFs trade continuously like stocks, so their market price may be slightly above (premium) or below (discount) NAV throughout the day.
Unlike stocks, a higher or lower NAV does not indicate whether a fund is "expensive" or "cheap" — NAV is just a math calculation. Two funds tracking the same index with NAVs of $10 and $300 are not different in terms of value; the $300 fund just hasn't split or started from a higher seed price.
Related terms
- ETF (Exchange-Traded Fund)
- An ETF is a basket of securities — stocks, bonds, or other assets — that trades on a stock exchange like a single share. ETFs combine the diversification of a mutual fund with the flexibility of stock trading and typically have very low expense ratios.
- Mutual Fund
- A mutual fund pools money from many investors to buy a diversified portfolio of securities. Unlike ETFs, mutual funds are priced once daily after market close. They come in two types: actively managed (a manager selects securities) and passively managed index funds.
- Index Fund
- An index fund is a portfolio of stocks or bonds designed to replicate the performance of a market index, such as the S&P 500. Index funds have lower fees than actively managed funds because no stock-picking is required.
- Expense Ratio
- An expense ratio is the annual fee a fund charges investors, expressed as a percentage of assets under management. It is deducted automatically from the fund's returns. Lower is almost always better.