NAV stands for Net Asset Value. It represents the total value of a fund’s assets minus its liabilities, divided by the number of outstanding shares. NAV shows the per share value of an investment fund.
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NAV shows the actual underlying value of a fund.
Investment funds such as mutual funds collect money from many investors and use that money to buy assets like stocks, bonds, or other securities. The value of these assets changes during the day as market prices move. To determine the NAV, the fund adds up the total value of everything it owns and subtracts any debts or expenses. The remaining amount is then divided by the number of fund shares. This calculation gives the value of one share of the fund. Investors use NAV to understand how the value of their investment changes over time.
Short example:
Suppose a fund collects money from many investors and uses it to buy stocks and bonds.
At the end of the day, the total value of all the investments in the fund is $100 million.
The fund also has $5 million in costs and obligations, leaving $95 million in net assets. If the fund has issued 10 million shares to investors, the NAV is calculated by dividing $95 million by 10 million shares. This means each share of the fund is worth $9.50.
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