Net Asset Value.
In plain English
Net asset value, or NAV, is the value of one share of a mutual fund or ETF. You calculate it by adding up the total value of all the fund's holdings, subtracting any liabilities the fund owes, and dividing by the number of shares investors hold. Mutual funds set their NAV once per day, after the market closes, and every buyer and seller that day trades at that single price. ETFs also have a NAV, but they trade all day on an exchange, so their market price can drift slightly above or below NAV.
01Why it matters
For a mutual fund, NAV is literally the price you pay or receive, so understanding it tells you exactly what your shares are worth at the end of each trading day.
02The math, step by step
A fund holds investments worth $500 million and owes $5 million in expenses, and has 25 million shares outstanding. Its NAV is ($500M minus $5M) divided by 25M, which equals $19.80 per share. If you invest $1,000 that day, you receive about 50.5 shares.
03What this is NOT
A low NAV does not mean a fund is cheap or a bargain. NAV is just a per-share price set by dividing assets by share count. It says nothing about quality or future returns.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice