NAV (Net Asset Value) Definition and Meaning

The per-share price of a mutual fund or ETF—calculated by adding up everything the fund owns, subtracting what it owes, and dividing by the total number of shares.

NAV is the price tag on a mutual fund share. Unlike stocks that bounce around all day based on supply and demand, mutual fund NAV is calculated once—after the market closes at 4 PM ET. Every buy and sell order placed during the day settles at that closing NAV.

The math is straightforward: (Total Assets - Total Liabilities) / Shares Outstanding = NAV. If a fund holds $100 million in securities, has $1 million in liabilities, and 10 million shares outstanding, the NAV is $9.90 per share.

For ETFs, things get a bit more interesting. ETFs trade on exchanges at market prices that can drift slightly from the actual NAV. When the market price is above NAV, that's called a premium; below NAV is a discount. For popular, liquid ETFs, arbitrage keeps prices very close to NAV.

NAV moves daily based on how the fund's underlying holdings perform. If the stocks in an S&P 500 index fund rise 1%, the fund's NAV goes up roughly 1% too (minus a tiny daily slice of the expense ratio).

One common misunderstanding: a fund with a lower NAV is not "cheaper" or a better deal. NAV is just a function of total assets divided by shares—it says nothing about whether the underlying investments are fairly valued. A $10 NAV fund and a $100 NAV fund can deliver identical returns.

Frequently Asked Questions

▸Is a lower NAV better?

Nope. NAV is just the per-share price—it doesn't tell you anything about quality or value. A $10 NAV fund isn't a better deal than a $100 NAV fund. What actually matters is the fund's total return, expense ratio, and what it invests in.

▸Why is my ETF's price different from its NAV?

ETFs trade at market prices that can differ slightly from NAV. Small gaps (under 0.1% for liquid ETFs) are totally normal. Larger deviations usually mean low liquidity or market stress. Authorized participants help close significant gaps by creating or redeeming ETF shares.