NAV is the core value measurement for mutual funds, ETFs, and other pooled investment vehicles. Instead of fluctuating second-by-second like a stock price, NAV is calculated at the end of each trading day. It reflects the total value of everything the fund owns—stocks, bonds, cash, and other assets—minus what it owes.
Once the fund’s total net value is determined, it’s divided by the number of shares outstanding. This gives investors a clear, standardized way to understand what each share of the fund is worth. While NAV doesn’t tell you whether a fund is “cheap” or “expensive,” it does serve as the baseline reference for investment performance, inflows, redemptions, and accounting.
In ETFs, NAV is crucial for understanding how closely the trading price matches the fund’s underlying value. In mutual funds, NAV determines the price at which investors buy or redeem shares each day. Behind the scenes, administrators, custodians, and portfolio managers rely on NAV as the anchor for reporting, compliance, and fund operations.
NAV matters because it’s the most accurate representation of a fund’s real underlying value. Investors use it to track performance, compare funds, and understand whether an ETF is trading at a premium or discount.
NAV is calculated by adding up the total market value of a fund’s assets, subtracting its liabilities, and dividing the result by the number of shares outstanding. Mutual funds calculate NAV once per trading day after markets close because they rely on closing prices and need time to reconcile holdings. ETFs publish NAV daily as well, but their market prices fluctuate throughout the day, creating premiums or discounts relative to the official NAV.
ETF prices fluctuate based on supply and demand in the market, while NAV is fixed once per day. When investors are eager to buy, the trading price may rise above NAV (a premium). When selling pressure dominates, the price may fall below NAV (a discount). Authorized participants use arbitrage to keep these differences in check, but temporary gaps still occur—especially during volatility or in funds holding hard-to-price assets.
NAV provides a clean measurement of how the fund’s underlying value has changed. Since it reflects total holdings rather than trading sentiment, investors can compare NAV day-over-day, month-over-month, or year-over-year to track gains or losses. Because dividends and capital-gain distributions are factored into NAV calculations, it allows for accurate long-term performance analysis that isn’t distorted by trading noise.
A mutual fund holds $500 million worth of assets and has $10 million in liabilities. With 49 million shares outstanding, its NAV is:
($500M − $10M) ÷ 49M = $10.00 per share.
Investors buying or redeeming shares that day transact exactly at this NAV price.
