Friday, December 24, 2010


NAV or Net Asset Value is the total value of all the securities in a portfolio less any liabilities. NAV is typically reported on a unitised or per share basis, and as such will be divided by the total number of shares or units on issue. In the case of an open ended mutual fund the NAV is interchangeable with the word price, and purchases/redemptions occur at the NAV (with there sometimes being a buy-sell spread). In the case of Exchange Traded Funds, the NAV per share is the net asset backing per share, but the price may be higher or lower based on investor demand for that fund: for example a hotly demanded ETF may trade at a premium to NAV, but typically ETF's will trade at a slight discount to NAV [Note: if the discount to NAV becomes too great then it will create arbitrage opportunities]. It is important to understand how a mutual fund NAV is calculated and reported i.e. whether it includes the impact of fees, tax, and any distributions; depending on what is factored in NAV may not be useful for calculating returns - instead the fund manager supplied returns will likely be a better option to use.

Synonyms: Net Asset Value, Asset backing, Buy price, Sell price, iNAV, NAVPS,

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