{"id":10869,"date":"2016-09-06T09:28:38","date_gmt":"2016-09-06T16:28:38","guid":{"rendered":"http:\/\/www.marketriders.com\/investing\/?p=10869"},"modified":"2016-12-20T13:41:47","modified_gmt":"2016-12-20T21:41:47","slug":"investor-facts-net-asset-value","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/investor-facts-net-asset-value\/","title":{"rendered":"Investor Facts: What Is Net Asset Value?"},"content":{"rendered":"

Net asset value (NAV) is the total\u00a0value of the investments owned by a mutual fund after subtracting costs, expressed in dollars per share.<\/p>\n

Investment companies own\u00a0dozens or hundreds of individual company stocks<\/a>,\u00a0bonds and other investments on behalf of their clients. The amounts and values of each holding in a given fund can vary daily.<\/p>\n

\"net<\/p>\n

Fund companies also have\u00a0costs associated with doing business, such as salaries, bonuses and marketing, as well as fees they charge their clients for investment management.<\/p>\n

Investors in mutual funds buy units or shares in the\u00a0fund. Since the underlying investments in a\u00a0fund can be numerous and complex, the value of a single share<\/a> is calculated at the end of the trading day and published. That number is the fund\u2019s net asset value.<\/p>\n

Net asset value is most useful for understanding the current \u201cfair value\u201d of a mutual fund, minus costs and ignoring the unknowable value of a given fund manager\u2019s investment skills.<\/p>\n

Net asset value clears up two very complicated problems in\u00a0valuing a mutual fund<\/a>: How much in investments\u00a0do they own, and how much do\u00a0they spend on running the fund?<\/p>\n

Mutual fund managers don\u2019t normally want to share information on how much they own of specific investments. Divulging their chosen mix of stocks and bonds could\u00a0put them at a disadvantage when\u00a0trading and result in losses if the information gets out.<\/p>\n

Funds also don\u2019t share specific data on their cost of doing business. They are required to disclose fees, of course, but accurately applying fee ratios to an entire\u00a0fund can be difficult for outside investors.<\/p>\n

Assets and liabilities<\/h2>\n

Net asset value solves both problems. A single number capture assets and liabilities and gives investors a starting point for deciding whether to buy or sell a fund.<\/p>\n

In practice, if you buy a fund during the\u00a0trading day the price you will get will be the net asset value published at the end of that day, after trading hours.<\/p>\n

However,\u00a0if you invest in closed-end fund, it\u2019s possible to buy the fund during the trading day as you would\u00a0a stock, while\u00a0the price fluctuates.<\/p>\n

As a result, the price you pay for a closed-end fund could be higher or lower than the current net asset value of the\u00a0fund. This suggests that you are paying a premium for \u2014 or getting a discount on \u2014 the fund\u2019s investment assets and, presumably, on the skill of the fund\u2019s managers.<\/p>\n","protected":false},"excerpt":{"rendered":"

Net asset value (NAV) is the total\u00a0value of the investments owned by a mutual fund after subtracting costs, expressed in dollars per share. 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