Calculate the Net Asset Value of a Mutual Fund

By Stock Research Pro • May 19th, 2009

The term Net Asset Value (NAV) refers to the price per share of a mutual fund or the per-share value of an exchange-traded fund (ETF). The value is calculated by dividing the total net value of the securities by the number of shares in the fund. The net asset value functions in a similar way to a stock price in that it measures the value of a single share and can be used to compare fund performance against benchmarks. Net asset value is calculated at the close of market each day and is derived from the current market prices of the fund’s underlying securities.

Calculating the Net Asset Value

The net asset value of a mutual fund reflects the market value of all securities (e.g. stocks, bonds, cash) owned by the fund, less its total liabilities. That total is then divided by the number of shares outstanding, since NAV is typically issued on a per share basis. The net asset value, then, is the price per share of the fund.

The formula for net asset value can be written as:

NAV = Net Asset Value of the Fund / Number of Shares Outstanding

Net Asset Value and Open-Ended Funds

The majority of mutual funds are open-ended. An open-ended fund is a mutual fund in which shares are not traded between investors but issued to investors by the fund without restriction as to the amount it issues. The fund will buy back shares from investors when they decide to sell. The net asset value is important to open-ended fund investors because it is the price investors pay for new shares of the fund and the price for which they may redeem shares they hold.

Conversely, closed-end mutual fund shares are traded at market prices, similar to stocks. These market prices might be at a premium or a discount to the net asset value. Shares of closed-end funds normally trade at a discount to the net asset value.

Limitations of Net Asset Value for Investors

While the net asset value provides a method to track price changes, it is not always a good indicator of the actual performance of the fund. Any time the fund pays a distribution to its shareholders, the net asset value decreases. This means that a decrease in the fund’s net asset value per share is not necessarily indicative of poor performance.


The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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