What is Net Asset Value?
NAV represents the per-share market value of a fund. If a mutual fund holds $500 million in securities, has $2 million in liabilities, and 10 million shares outstanding, the NAV is $49.80 per share. Mutual funds calculate NAV once daily after markets close at 4:00 PM Eastern Time, and all buy and sell orders for that day execute at this single price.
NAV for ETFs vs. Mutual Funds
ETFs trade on exchanges throughout the day at market prices that may differ slightly from NAV. This difference is called the premium or discount. A popular S&P 500 ETF typically trades within 0.01-0.02% of its NAV, while niche ETFs holding illiquid assets might trade at discounts of 1-3%. Mutual funds always transact exactly at NAV, eliminating premium and discount risk.
Key Considerations
A higher NAV does not mean a fund is more expensive or a better investment - it simply reflects the accumulated value per share. A fund with NAV of $150 is not inherently better than one at $25. What matters is the percentage return over time. When comparing funds, focus on total return, expense ratio, and tracking error rather than the absolute NAV figure.