Simple definition
NAV, or net asset value, is the per-share value of a fund. You find it by taking everything the fund owns, subtracting what it owes, and dividing by the number of shares. Think of it like splitting a pizza's worth evenly among everyone at the table: each slice is one share's fair value.
Why it matters
NAV tells you what each share of a fund is actually worth based on its holdings. For most mutual funds, you buy and sell at NAV, so it is the price you pay. Understanding it helps you judge whether a traded fund is priced fairly against its true value.
Real-life example
Suppose a fund owns investments worth $1,000,000 and owes $50,000 in costs, leaving $950,000. If it has 100,000 shares, its NAV is $9.50 per share. Buy a share of a regular mutual fund and that is roughly the price you pay, based on the day's closing value.
Common mistakes
- Thinking a low NAV means a fund is cheap or a bargain.
- Assuming a traded fund's market price always equals its NAV.
- Confusing NAV with a fund's total return or performance.
- Believing NAV updates constantly, when mutual fund NAV is set once daily.
Pro tips
- Judge a fund by its holdings and fees, not its NAV number alone.
- Remember most mutual funds price once a day at NAV.
- Compare a traded fund's price against its NAV to spot a premium or discount.
- Do not treat a low NAV as a sign of a good deal.
Related Money Dictionary terms
- Mutual FundA pooled investment where many people's money is combined and managed together to buy a mix of stocks or bonds.
- ETF (Exchange-Traded Fund)A basket of investments that trades like a single stock, letting you own many holdings at once with one purchase.
- Expense RatioThe yearly fee a fund charges, shown as a percentage of your investment, that covers its operating costs.
- Money Market FundA low-risk fund that invests in short-term, high-quality debt and aims to keep a stable share price.
- Premium and DiscountWhen an investment trades above or below its underlying value, common with funds and bonds.
Frequently asked questions
Does a low NAV mean a fund is cheaper or better?
No. NAV is just the per-share value of the fund's holdings, not a measure of value or quality. A fund with a low NAV is not a bargain, and a high one is not overpriced. What matters is what the fund holds and what it charges, not the size of the number.
How often does NAV change?
For most mutual funds, NAV is calculated once each day, after markets close, based on the value of the holdings. So you buy or sell at that day's NAV, not a price that ticks up and down all day. Exchange-traded funds, by contrast, trade throughout the day at market prices.
Is NAV the same as the price I pay for a fund?
For a regular mutual fund, yes, you generally buy and sell at NAV. But for funds that trade on an exchange, the market price can differ from NAV, sitting above or below it. Comparing the two tells you whether you are paying a premium or getting a discount.
Knowing what NAV (Net Asset Value) means is knowledge — the first half. A brick gets placed when you act on it: look up the NAV of a fund you own and compare it with its market price if it trades on an exchange.
Sources & references
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Plain-English education — not personalized legal, tax, or investment advice.