NAV stands for Net Asset Value. But the meaning of NAV and its significance goes far beyond this simple definition.

Net Asset Value (NAV)

This term applies to mutual funds and ETFs and it can impact your investment decisions in a big way. NAV — net asset value — is what you would receive if you took all the holdings of a mutual fund or ETF sold them at market value and then divided the proceeds up to all the shareholders of the fund.

They own shares of Orange Stock and shares of Banana Stock. With me so far? See how easy that is? You are a mutual fund master blaster! Mutual funds publish their NAV at the end of each trading day. What they do is simply take all the holdings and calculate what they are worth had they sold those securities at the end of the business day just like we did together in the paragraph above. As you can see, NAV drives the performance of your funds.

If NAV rises, the value of your shares in the fund goes up. If NAV drops that value declines too. NAV is also a very important concept for ETF investors. While the definition is the same, it is actually a far more important consideration than with mutual funds because ETFs trade like stocks.

If you buy a very popular ETF that is very liquid, the shares will trade very close to the NAV. Since NAV is the real value, you can expect the price of liquid ETFs to hover around the NAV. If there are no sellers for an ETF and you want to buy shares, you may have to bid up your price to such a point that it exceeds the NAV.

If you do that, you are paying more than those shares are really worth. This is one reason why you probably want to stay away from thinly traded ETFs. Just remember that NAV is the number that reflects the real value of each of the shares you hold in a fund.

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Net Asset Value Definition & Example | Investing Answers

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What is a mutual fund's NAV? | Investopedia

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