net asset value
The per-share value of a mutual fund or ETF, calculated by dividing total assets minus liabilities by the number of outstanding shares.
Example
“The mutual fund's NAV was $42.50 per share — the price at which investors could buy or sell that day.”
Memory Tip
NAV = the fund's price per share. Calculated once daily after markets close.
Why It Matters
Net asset value helps investors understand the true worth of their mutual fund or ETF investment on any given day. It allows you to compare the actual value of your shares against the price you paid, making it easier to track gains or losses and make informed decisions about buying or selling.
Common Misconception
Many people believe that a mutual fund with a higher net asset value per share is a better investment than one with a lower value. In reality, the share price tells you nothing about fund performance or quality, as funds with identical holdings can have different share prices based on when they were created.
In Practice
Suppose a mutual fund has total assets of 500 million dollars and total liabilities of 20 million dollars, with 20 million shares outstanding. The net asset value would be calculated as (500 million minus 20 million) divided by 20 million, resulting in a net asset value of 24 dollars per share. If you own 100 shares, your investment is worth 2400 dollars at that moment.
Etymology
NET (after deductions) ASSET (owned property) VALUE (worth). The NET VALUE of all ASSETS per share.
Common Misspellings
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Related Terms
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See Also
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