The Net Asset Value (NAV) of a mutual fund or an exchange-traded fund (ETF) on a specific date or time is the price at which units of mutual fund are bought or sold. It is the market value of the fund after deducting all liabilities, then divided by total no of units.
i. e. : NAV = (Total fund value – All Liabilities)/ Total no of units
In the context of mutual funds, NAV per share is computed once per day based on the closing market prices of the securities in the fund’s portfolio. All of the buy and sell orders for mutual funds are processed at the NAV of the trade date. However, investors must wait until the following day to get the trade price. Mutual funds pay out virtually all of their income and capital gains. As a result, changes in NAV are not the best gauge of mutual fund performance, which is best measured by annual total return.
As ETFs and closed-end funds trade like stocks, their shares trade at market value, which can be a dollar value above (trading at a premium) or below (trading at a discount) NAV. ETFs have their NAV calculated daily at the close of the market for reporting purposes, but they also calculate intra-day NAV multiple times per minute in real time.
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