NAV
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The net value of an entity. Calculated as the total value of the entity’s assets minus the total value of its liabilities. The per share/unit price of the fund on a specific date or time.
Summary
NAV (Net Asset Value) is the per-share value of a mutual fund or ETF, calculated by dividing the total value of all securities in the fund's portfolio (minus liabilities) by the number of outstanding shares. Think of it as the 'price tag' that shows what each share of the fund is actually worth based on its underlying investments. NAV is typically calculated at the end of each trading day and serves as the basis for buying and selling mutual fund shares.
Usage Context
Understanding NAV is crucial when studying mutual funds and ETFs, evaluating fund performance, calculating returns, and understanding how fund pricing works. It's essential for portfolio management topics and investment analysis.
Common Confusions
- Thinking NAV is the same as stock price - NAV is calculated once daily while stock prices fluctuate constantly
- Believing you can buy mutual funds below NAV - retail investors typically pay NAV plus any fees
- Confusing NAV with total return - NAV doesn't include dividend distributions already paid out
- Assuming higher NAV means better fund performance - NAV alone doesn't indicate fund quality
