Table of Contents

net asset value (NAV)

finance

Also known as: NAV

Written byDoug Ashburn

Fact-checked byThe Editors of Encyclopaedia Britannica

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The math behind your fund shares.

Also Known As:: NAV

Net asset value (NAV) is the value of a fund’s assets minus its liabilities divided by the total number of shares outstanding. Expressed as a per-share value, NAV represents the market value of a mutual fund or exchange-traded fund (ETF).

NAV example

Suppose a fund holds $105 million in assets, consisting of:

$90 million in stocks and bonds
$10 million in cash
$5 million in dividends, interest, and other accounts receivable

It also holds $5 million in liabilities, including:

$2 million owed for securities recently purchased but not yet settled
$1 million in accrued management and administrative fees
$2 million in other accrued expenses and accounts payable

If the fund has 5 million shares outstanding, its NAV is $20 per share.

NAV = ($105 million − $5 million) ÷ 5 million = $20

How mutual funds use NAV

A mutual fund generally calculates its NAV once each trading day, after stock and bond markets close for the day. If you buy or redeem mutual fund shares, you won’t know the exact price when you place the order. Instead, your transaction is completed at the next calculated NAV.

When money flows into a mutual fund, the fund issues new shares at NAV and receives cash that can be invested in the portfolio. When investors redeem shares, the fund cancels those shares and pays investors their value based on NAV. The fund may use available cash or sell securities to meet those redemptions.

Closed-end funds and NAV

Like ETFs, closed-end funds trade on an exchange, so their market price can be higher or lower than their NAV. But unlike ETFs, closed-end funds don’t use the same creation-and-redemption mechanism to keep the two prices closely aligned. As a result, closed-end funds can trade at substantial premiums or discounts to NAV—and those gaps can persist.

Learn more about investing in closed-end funds.

Buying or redeeming mutual fund shares generally doesn’t change the NAV per share, because new money comes with new shares, while redemptions remove shares from the fund.

How ETFs use NAV

ETFs also calculate NAV, but investors typically don’t buy and sell ETF shares at NAV. ETFs trade like stocks. Bids and offers are posted throughout the trading day, which means you can buy or sell whenever the market is open, and you can also track the last sale price down to the penny. As a result, an ETF’s market price can be above its NAV—a premium—or below it—a discount.

Authorized participants can create or redeem large blocks of ETF shares when differences develop between the ETF’s market price and the value of its underlying holdings. This creation-and-redemption process provides an arbitrage mechanism that generally keeps an ETF’s market price close to its NAV.

This article was most recently revised and updated by Doug Ashburn