Net Asset Value (NAV)

Written By
Paul Tracy
Updated November 4, 2020

What is Net Asset Value?

Most commonly used in reference to mutual or closed-end funds, net asset value (NAV) measures the value of a fund's assets, minus its liabilities. NAV is typically calculated on a per-share basis.

Net Asset Value Formula

A fund's NAV fluctuates along with the value of its underlying investments. The formula for NAV is:

NAV = (Market Value of All Securities Held by Fund + Cash and Equivalent Holdings - Fund Liabilities) / Total Fund Shares Outstanding

Let's assume at the close of trading yesterday that a particular mutual fund held $10,500,000 worth of securities, $2,000,000 of cash, and $500,000 of liabilities. If the fund had 1,000,000 shares outstanding, then yesterday's NAV would be:

NAV = ($10,500,000 + $2,000,000 - $500,000) / 1,000,000 = $12.00

A fund's NAV will change daily as the value of a fund's securities, cash held, liabilities, and the number of shares outstanding fluctuate.

Why Net Asset Value Matters

Net asset values are like stock prices in that they measure the value of one share of a fund. Also, they give investors a way to compare a fund's performance with market or industry benchmarks (such as the Standard & Poor's 500 or an industry index).

However, some analysts argue that comparing long-term changes in a fund's NAV is not as meaningful as comparing long-term changes in its share price because funds periodically distribute capital gains to their fundholders, thus reducing their NAV.

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