NAV, or Net Asset Value, in stocks is the per-share value of a mutual fund or ETF’s total assets minus its liabilities, calculated at the end of each trading day. It is the price at which investors buy and sell shares of the fund, reflecting the combined market value of the fund’s underlying holdings.
What NAV represents
- Fund’s value: NAV is a snapshot of the fair market value of one share of a fund, based on the performance of all the securities it owns.
- Calculation: The formula is:
(Total value of fund assets - Total fund liabilities) / Number of outstanding shares. - Daily changes: Since the fund’s holdings (stocks, bonds, etc.) constantly change in value, the NAV is calculated daily to reflect these changes.
NAV vs. market price for ETFs
- Market Price: The price at which an ETF is bought or sold on an exchange during trading hours.
- NAV: The closing price calculated at the end of the day based on the underlying assets.
- Trading: While an ETF can trade at a market price that is higher or lower than its NAV, the NAV serves as a baseline for investors to gauge if the market price is fair.
