We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Mutual Fund Net Asset Value?

Jim B.
By
Updated: May 17, 2024
Views: 3,959
Share

Mutual fund net asset value is the method by which a mutual fund's market value, which is the price investors pay for shares in the fund, is determined. This value is calculated by taking the value of the assets held in the fund and subtracting the liabilities in the fund. As a fund's market share price is determined by the mutual fund net asset value, or NAV, the price is not subject to change because of market supply and demand. The NAV is determined at the end of a day's trading and is dependent on the closing prices of the securities within the fund.

As opposed to stocks and bonds, mutual funds are investment vehicles that take money from multiple investors and pool those funds together. Those funds are then invested in various securities, and they pay off when the value of those included securities goes up, which produces capital gains for investors. The overall value of the fund must be reflective of all of the securities within it, which is why the mutual fund net asset value is calculated.

For an example, imagine that a fund has assets that are worth $100,000 US Dollars (USD) and liabilities totaling $10,000 USD at the end of a particular trading day. To calculate the mutual fund net asset value, the $10,000 USD in liabilities is subtracted from the $100,000 USD in assets. This produces a NAV for this fund of $90,000 USD for that day.

From that total, someone can then calculate the market price per share of the mutual fund by dividing the number of outstanding shares held by investors. Using the example above, imagine that there are a total of 10,000 outstanding shares in the fund. Dividing the mutual fund net asset value of $90,000 USD by 10,000 outstanding shares produces a NAV per share of $9 USD. This is the price that investors must pay to become involved in the fund.

It is important to note that most mutual funds determine their share price in this manner, as opposed to stocks, whose market prices are based solely on the whims of investors. There are, however, exceptions to this rule, specifically closed-end and exchange-traded funds. While these funds do have a mutual fund net asset value, the NAV does not determine the price per share of the funds. Instead, the supply and demand forces determine these prices, as these funds, unlike normal mutual funds, may be traded on the open market.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Jim B.
By Jim B.
Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own successful blog. His passion led to a popular book series, which has gained the attention of fans worldwide. With a background in journalism, Beviglia brings his love for storytelling to his writing career where he engages readers with his unique insights.

Editors' Picks

Discussion Comments
Jim B.
Jim B.
Freelance writer - Jim Beviglia has made a name for himself by writing for national publications and creating his own...
Learn more
Share
https://www.wisegeek.net/what-is-a-mutual-fund-net-asset-value.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.