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Strabo Glossary: NAV (Net Asset Value)

NAV (Net Asset Value)


NAV stands for Net Asset Value, and it is a financial metric commonly used in the investment industry to determine the value of an investment fund, such as a mutual fund or an exchange-traded fund (ETF). The NAV represents the per-share or per-unit value of the fund after deducting its liabilities from its assets.


The NAV of a fund is calculated by dividing the total value of the fund's assets minus any liabilities by the number of outstanding shares or units. The formula for calculating NAV is:

  NAV = (Total Assets - Total Liabilities) / Number of Shares or Units

Key Features

  1. Asset Valuation: The total assets of a fund include the value of all the investments held by the fund, such as stocks, bonds, cash, and other securities. The value of these assets is determined based on their market prices or other valuation methodologies, depending on the type of investment.
  2. Liabilities: Liabilities refer to any outstanding debts or obligations of the fund, including expenses, fees, and any other liabilities. These liabilities are subtracted from the total assets to arrive at the net asset value.
  3. Significance: The NAV per share or unit of a fund represents the underlying value of each individual share or unit. It is used by investors to determine the price at which they can buy or sell shares of the fund. When investors buy shares, they typically pay the NAV per share plus any applicable fees. When selling shares, investors receive the NAV per share minus any applicable fees.
  4. Valuation Frequency: The NAV is usually calculated at the end of each trading day, and this is referred to as the daily NAV. This allows investors to know the most recent value of their investments and facilitates buying and selling at the end-of-day NAV price.
  5. Price and NAV Variations: It's important to note that the market price of a mutual fund or ETF may not always be exactly equal to the NAV. The market price is determined by supply and demand in the secondary market and may deviate from the NAV due to factors such as investor sentiment, liquidity, or transaction costs.

In Summary

NAV is a key measure used by investors to assess the value and performance of an investment fund. It provides transparency and facilitates the buying and selling of fund shares at a fair and known price. Investors can track changes in the NAV over time to evaluate the performance of their investments and make informed decisions.

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