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What Is Net Asset Value (NAV)?

The net asset value (NAV) of a fund is a metric that allows investors to track its per-share value over time. Learn how it works in this article.

There are many different metrics that investors use to value a given asset. These inform both buying and selling decisions. One important number is a security’s net asset value, or NAV, which refers to a company’s value, minus its expenses.

In this article, we’ll explain what NAV is and how investors use it. This includes how it applies to various types of securities, such as mutual funds, exchange-traded funds (ETFs), and real estate investment trusts (REITs). We’ll also break down how to calculate an entity’s NAV.

Key Takeaways

  • NAV is an entity’s asset value minus its total liabilities
  • Most often, NAV is used to track and determine the per-share and per-unit price of investment funds.
  • Mutual funds, UITs, ETFs, and REITs are all common examples of funds that use NAV.
  • An entity’s assets and liabilities change daily, thus requiring NAV to be calculated daily.
  • NAV is problematic as an indicator of a fund’s overall performance because liabilities may decrease due to miscellaneous reasons, such as paying shareholders.

NAV Definition

Net asset value (NAV) is an entity’s asset value minus the sum of its liabilities. Generally, when experts and investors refer to NAV, they’re talking about it as it relates to valuing funds. This includes:

For the above, NAV represents a fund’s value and price. Investors then use this price to base purchase and sale decisions. A company’s assets and liabilities are highly fluid, changing daily. Because of this, entities must calculate their value each business day after the U.S. market closes.

How to Calculate NAV

The NAV of an entity is calculated by taking its total asset value and subtracting it from the sum of its liabilities. Then, to find the value of a fund, one must divide this number by the outstanding number of shares available. This allows investors to track a fund’s per-share and per-unit price at any given time.

To give you an example, consider that an entity’s asset value is $200 million, while its total liabilities amount to $38 million. Its NAV would equal $162 million.

Commonly, NAV is most relevant to investment funds, such as mutual funds, UITs, or ETFs. In this case, an entity’s per-share value is what people use, which, as mentioned above, is figured by dividing the total net value by the outstanding number of shares. For instance, if the fund in the previous example had 1 million outstanding shares, its per-share NAV would be $162.

Difference Between NAV and Share Price

Share price and NAV are both important metrics used in conjunction with investing in funds. And, because they’re related to a share’s value, it’s common for people to mistake them as being synonymous. Their function, however, is much different.

The share price of a fund refers to what amount investors typically buy and sell shares at in the market at a given time. Typically, this number fluctuates throughout the day until the market closes. Unlike NAV, a share price can have many different factors influencing it, such as supply and demand and performance.

NAV, on the other hand, represents a fund’s per-share value based on its asset value, liabilities, and the number of outstanding shares. Contrary to the share price, it only fluctuates each day due to daily recalculations after the market closes. This is because an entity’s assets and liabilities are constantly changing.

What Investors Use NAV For

NAV is a valuation metric for many different securities. Most often, these are investment funds, such as mutual funds, ETFs, or REITs, which pool money from several investors. Funds are entities themselves with assets and liabilities, which is where their value derives from.

By tracking the NAV of an investment fund, it allows investors to assess its value over time. However, one of the metric’s pitfalls is that it isn’t always indicative of a fund’s overall performance. Whenever an investment scheme, such as a mutual fund or REIT, makes a distribution to shareholders, it raises its liabilities and, consequently, lowers the NAV.

Because NAV isn’t the best indicator of a fund’s overall success, it’s not necessarily the best metric to use. It can indicate the financial health of a fund, but it likely won’t be the end all, be all sign that it’s a good investment. Rather, investors tend to track the total annual return of a fund, which these entities provide via their prospectus.

How NAV Works for Different Securities

When investors refer to NAV, they generally are using it to track an investment fund’s performance or share value. There are, however, some different details to pay attention to regarding a security’s net value depending on the type. Below, we explain how the metric works for common funds where it comes into play:

Mutual Funds

The SEC requires mutual funds (and UITs) to calculate and report its NAV daily. Once the market closes, a fund must tally up its assets and liabilities, and then make its calculation. It’s important to note that, when you buy and sell shares of a mutual fund, you do so at the next net value that becomes available, not the most recent.


ETFs, unlike mutual funds, don’t trade exactly at their NAV. Rather, their price tends to hover higher or lower than it. Additionally, the net value of an ETF, while calculated daily, also has an estimated intraday number that you can access every 15 seconds.


Like mutual funds and ETFs, REITs report their NAV for investors to track. A REIT’s net value is based on the market values of the properties within its portfolio. Moreover, this value is displayed as a per-unit metric, meaning the overall value is divided by the number of outstanding units.

Frequently Asked Questions

Is a high NAV good or bad?

A higher NAV indicates that an entity is profitable and has a surplus of assets. This metric will lower if its liabilities increase, which could happen for several reasons, including distributing dividends to shareholders.

What is NAV used for?

Investors use NAV to track the per-share value of a fund. It can be an important performance indicator for this reason. Be aware, however, that an entity’s NAV can decrease because of realized capital gains or dividend distributions.

Is NAV the same as share price?

No, NAV isn’t the same as market value or share price. It represents the per-share, or per-unit value of a fund based on its assets and liabilities. Share price is the cost investors must pay to buy shares of a security. Several factors influence this cost, namely supply and demand and overall performance.

How do I track a mutual fund’s NAV?

You can track a mutual fund’s NAV on financial platforms or an online brokerage. Additionally, many other financial websites record these values for investors to use. You can find more information on a fund, such as its total annual performance, on its prospectus or website.