What Is Net Asset Value (NAV)? Formula and Examples
By Markets & Investing DeskUpdated Nov 10, 2026
Definition
Net asset value (NAV) is a fund's assets minus its liabilities. Divided by shares outstanding, it gives NAV per share, the price used for mutual fund purchases and redemptions.
Key takeaways
- U.S. mutual funds use forward pricing, filling each order at the next NAV calculated after the fund receives it.
- Fund fees accrue daily and lower NAV continuously instead of appearing as a separate charge on statements.
- A closed-end fund trading at $18 with a NAV of $20 sits at a 10% discount to the value of its holdings.
- NAV falls by the amount of each distribution, which makes total return the standard measure of fund performance.
Net asset value (NAV) is the value of a fund’s assets minus its liabilities. Divided by the number of shares (or units) outstanding, it gives NAV per share, the figure used to price mutual fund purchases and redemptions and the benchmark that exchange-traded funds and closed-end funds are measured against. In casual use, “the fund’s NAV” usually means the per-share figure.
How Net Asset Value Works
Assets minus liabilities is the same arithmetic as a company’s net assets or net worth, with one difference: a fund’s assets are mostly marketable securities, revalued to current market prices every time NAV is calculated. A company’s balance sheet carries many assets at historical cost.
A fund’s assets typically include:
- Securities held (stocks, bonds, money market instruments), valued at closing prices or, if no reliable price exists, at fair value set under the fund’s valuation procedures
- Cash and cash equivalents
- Receivables, such as money owed for securities sold but not yet settled
- Accrued income, such as interest earned and dividends declared but not yet received
Its liabilities typically include:
- Payables for securities bought but not yet settled
- Accrued expenses, such as management fees and administrative costs, which build up daily
- Borrowings and other short- or long-term obligations
Because fees are accrued every day, they lower NAV continuously rather than appearing as a separate charge on an investor’s statement.
NAV Formula
NAV = Total assets − Total liabilities
NAV per share = (Total assets − Total liabilities) ÷ Shares outstanding
Fund documents sometimes call the per-share figure “NAV per unit,” particularly for unit investment trusts and non-U.S. funds. The calculation is the same.
NAV Example
Hypothetical fund, for illustration only. At the end of a trading day, a mutual fund holds:
| Item | Amount |
|---|---|
| Securities at closing prices | $250,000,000 |
| Cash and equivalents | $12,000,000 |
| Receivables | $3,000,000 |
| Accrued income | $200,000 |
| Total assets | $265,200,000 |
| Payables for securities purchased | $6,000,000 |
| Accrued expenses | $400,000 |
| Other liabilities | $1,800,000 |
| Total liabilities | $8,200,000 |
Shares outstanding: 10,000,000.
- NAV = $265,200,000 − $8,200,000 = $257,000,000
- NAV per share = $257,000,000 ÷ 10,000,000 = $25.70
That $25.70 is the fund’s price for the day before any sales charges. If the share class carries a 5% front-end load, the offering price is NAV ÷ (1 − 0.05), or about $27.05, so the investor gets $25.70 of fund value for each $27.05 paid. On the sell side, a hypothetical 2% redemption fee would leave proceeds of $25.70 × 0.98, or about $25.19 per share. Many funds charge no load and no redemption fee, in which case investors buy and sell at NAV itself.
Mutual Funds and NAV
Every share of a mutual fund represents the same slice of its portfolio. NAV per share keeps that arrangement fair: new investors pay the current value of a slice, and departing investors receive it.
Unlike a stock, whose price moves throughout the trading session, a mutual fund’s price is set once per business day. After the market closes, the fund (or its administrator) prices every holding, adds cash, receivables and accrued income, subtracts liabilities, and divides by shares outstanding.
Order timing and forward pricing
U.S. mutual funds use forward pricing: an order is filled at the next NAV calculated after the fund receives it. Most funds strike NAV as of the close of regular trading on the New York Stock Exchange, usually 4 p.m. Eastern. An order received before the fund’s cutoff gets that day’s NAV. An order received after the cutoff gets the next business day’s NAV. Brokers and retirement plans often set earlier internal cutoffs, so the cutoff that matters is the one on the investor’s platform.
As a result, a mutual fund investor never knows the exact price when placing an order. This prevents trading at stale prices after market-moving news.
Open-End, Closed-End and Exchange-Traded Funds
Open-end funds (most mutual funds, including those commonly offered in 401(k) plans) issue new shares when investors buy and retire shares when investors redeem. Because the fund itself is always the counterparty, every transaction happens at NAV, adjusted only for any loads or fees.
Closed-end funds issue a fixed number of shares that then trade on a stock exchange between investors. The fund does not redeem shares on demand, so the market price is set by supply and demand and can differ from NAV for long periods. The gap is measured as:
Premium or discount = (Market price − NAV per share) ÷ NAV per share
A closed-end fund trading at $18 with a NAV of $20 sits at a 10% discount. Investors compare price with NAV to judge whether a closed-end fund looks cheap or expensive relative to its holdings, although a discount can persist or widen.
ETFs also trade on exchanges throughout the day, but large intermediaries called authorized participants can create or redeem ETF shares in large blocks in exchange for the underlying securities. When an ETF’s price drifts from its NAV, that mechanism gives them a reason to trade the gap away, which tends to keep the price close to NAV for funds with liquid holdings. ETFs report an official NAV once a day after the close, and many also publish an intraday indicative value during trading hours.
NAV and Fund Performance
Comparing a fund’s NAV on January 1 with its NAV on December 31 does not measure what investors earned. U.S. mutual funds generally distribute nearly all of their net investment income (dividends and interest) and net realized capital gains to shareholders, which lets them avoid paying tax at the fund level. When a distribution is paid, NAV falls by the amount distributed, and that value moves to shareholders as cash or reinvested shares. A sharp one-day NAV drop with no matching market decline often reflects a distribution.
Hypothetical example: a fund starts the year at a NAV of $20.00 and ends at $20.50, having paid $1.20 per share in distributions during the year. The NAV change is 2.5%. Counting the distributions, and ignoring reinvestment for simplicity, the return is ($20.50 + $1.20 − $20.00) ÷ $20.00 = 8.5%.
Total return, which assumes distributions are reinvested, is the standard measure of fund performance. For periods longer than a year, it is usually annualized using the compound annual growth rate (CAGR).
Hedge Funds and Private Funds
The formula is the same for hedge funds and private investment funds, but the process differs. NAV is often calculated monthly or quarterly rather than daily, frequently by a third-party administrator. Performance fees and investors entering at different dates can make per-investor NAV more complex than a single per-share figure. Hard-to-value holdings such as private loans or unlisted equity rely on fair-value models instead of market quotes, which leaves more room for judgment.
Limitations of Net Asset Value
- It is a point-in-time figure. Mutual fund NAV reflects prices at the close, not the next trading session.
- Fair-value estimates matter. For thinly traded bonds, foreign securities or private assets, NAV depends partly on models and assumptions.
- It is not a performance measure. Distributions and fees move NAV regardless of investment results.
- It is not always the price you get. Loads, redemption fees and exchange market prices can differ from it.
NAV vs. Related Terms
Book value per share applies the assets-minus-liabilities idea to an operating company, using accounting values from its balance sheet. Many of those values are historical costs, and growth companies often trade well above book value because investors price in future earnings the balance sheet does not show. A fund’s NAV is based on current market or fair values of holdings that are themselves mostly priced by the market.
Shareholder equity is the accounting term for a company’s assets minus liabilities, including intangibles such as goodwill and patents. Analysts valuing holding companies, real estate firms or liquidation scenarios sometimes use an adjusted net asset value or net tangible asset value, which restates assets to market value and may strip out intangibles. It suits those cases better than an ongoing business whose worth comes mainly from future cash flows.
FAQs
Does a fund with a lower NAV have more room to grow?
No. NAV per share depends on when the fund launched and how many shares it has issued. A $1,000 investment grows by the same percentage whether the NAV is $10 or $100, assuming the same portfolio return.
The Bottom Line
Mutual fund investors, including 401(k) participants, use NAV as the price they pay and receive, adjusted for any loads or redemption fees. Closed-end fund and ETF investors can compare market price with NAV to see how far a fund trades from its holdings. Because distributions and fees move NAV regardless of investment results, investors judging performance should look at total return rather than the change in NAV.
