Net asset value (NAV)

What is NAV?

Net asset value (NAV) represents a fund's per-share or per-unit value, indicating the price at which investors can buy or sell their shares. NAV reflects the value of the fund's total assets, such as stocks, bonds, or other securities, minus its total liabilities.

How is NAV calculated?

NAV = (Assets - Liabilities) / Total number of outstanding shares

For instance, for ETFs tracking U.S. equities, NAV can be determined soon after the market's close, utilising the closing prices of each fund's assets for the calculation.

Why is NAV important?

NAV is calculated using tangible assets, contrasting with equity, which also includes intangibles like patents. It often aligns with a company's per-share book value. Companies anticipated to have high growth usually have valuations surpassing their NAV. In closed-end funds, NAV comparison with the share price is employed to pinpoint undervalued or overvalued investments.