Net Asset Value (NAV)

NAV tells investors what each unit of a fund is worth. It is calculated by adding up the market value of all the fund's investments and cash, subtracting liabilities such as fees owed, and dividing by the number of units outstanding.

For example, a fund holding investments worth 105 million, with liabilities of 5 million and 10 million units outstanding, has a NAV of 10.00 per unit.

Mutual funds are usually bought and sold at their NAV, which is typically calculated once a day after markets close. An investor placing an order during the day receives that day's closing NAV.

Exchange-traded funds and closed-end funds also report a NAV, but their shares trade on stock exchanges at market prices that can differ from NAV. When the market price is above NAV, the fund trades at a premium; when below, at a discount. For most large exchange-traded funds, the gap is very small, but for closed-end funds it can be significant.

A fund's NAV rising over time reflects growth in its investments, while distributions of income or gains reduce the NAV by the amount paid out.