Net asset value (NAV) represents a fund's per share market value. This is the price at which investors buy fund shares from a fund house and sell them to a fund house.
Dec 16 2013 11:25 PM
An NAV computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio's securities.
It is derived by dividing the total value of all the cash and securities in a fund's portfolio, less any liabilities, by the number of shares outstanding.
For example, if a fund has assets of $50 million and liabilities of $10 million, it would have a NAV of $40 million.
This number is important to investors, because it is from NAV that the price per unit of a fund is calculated. By dividing the NAV of a fund by the number of outstanding units, you are left with the price per unit. In our example, if the fund had 4 million shares outstanding, the price-per-share value would be $40 million divided by 4 million, which equals $10.