NAV (Net Asset Value)
Definition
The per-share value of a mutual fund or ETF, calculated by dividing the total value of the fund's assets minus liabilities by the number of shares outstanding.
Net Asset Value is the price at which mutual fund shares are bought and sold. Unlike stocks that trade at market-determined prices throughout the day, mutual fund NAV is calculated once daily after the market closes (4 PM ET). All buy and sell orders placed during the day execute at that day's closing NAV.
The calculation 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, the relationship between NAV and market price is more nuanced. ETFs trade on exchanges at market prices that can differ slightly from NAV. The difference is called the premium (market price above NAV) or discount (below NAV). Arbitrage mechanisms keep ETF prices very close to NAV for liquid funds.
NAV changes daily based on the performance of the fund's underlying holdings. If the stocks in an S&P 500 index fund rise 1%, the fund's NAV rises approximately 1% (minus the daily impact of the expense ratio).
A common misconception is that a fund with a lower NAV is "cheaper" or a better value. NAV is simply a function of how many shares exist and the total assets — it says nothing about whether the underlying investments are fairly valued. A $10 NAV fund and a $100 NAV fund can have identical investment performance.
Where this appears in Clarity
Clarity automatically tracks and calculates these concepts across your connected accounts.
Related Terms
Frequently Asked Questions
Is a lower NAV better?
No. NAV is simply the per-share price — it doesn't indicate value or quality. A $10 NAV fund isn't cheaper or better than a $100 NAV fund. What matters is the fund's total return, expense ratio, and what it invests in, not the share price.
Why is my ETF's price different from its NAV?
ETFs trade at market prices that can differ slightly from NAV. Small premiums or discounts (under 0.1% for liquid ETFs) are normal. Large deviations suggest low liquidity or market stress. Authorized participants arbitrage away significant gaps by creating/redeeming ETF shares.