Net Asset Value (NAV)
Net Asset Value (NAV) is the value per Share of a mutual fund or an exchange-traded fund (ETF), calculated by taking the total assets of the fund, subtracting its total liabilities, and dividing by the number of Outstanding Shares. NAV is used to determine the price at which shares of the fund will be bought or sold.
Formula: NAV = (Total Assets – Total Liabilities) / Total Outstanding Shares
Example 1: If a mutual fund has total assets of $10 million and total liabilities of $2 million with 1 million outstanding shares, the NAV would be:
- NAV = ($10,000,000 – $2,000,000) / 1,000,000 = $8 per share
Example 2: A real estate investment Trust (REIT) has total assets of $50 million, total liabilities of $20 million, and 5 million shares outstanding. The NAV would be:
- NAV = ($50,000,000 – $20,000,000) / 5,000,000 = $6 per share
NAV is typically calculated at the end of each trading day, reflecting the fund’s performance and allowing investors to make informed decisions.
