Net Asset Value (NAV) is the value of an entity’s assets minus the value of its liabilities. It is most commonly used when evaluating mutual funds or exchange-traded funds (ETF) and in this context is calculated at the end of each trading day.
For mutual funds and ETFs, the NAV is the price at which shares of the fund are bought or sold. It’s calculated by subtracting the fund’s liabilities from the current market value of its assets and then dividing by the number of outstanding shares.
Here’s the formula:
NAV = (Value of Assets – Value of Liabilities) / Total number of outstanding shares
This gives the per-share value or “price” for the mutual fund shares at the end of the trading day. When you buy shares in a mutual fund, you pay the NAV per share, and when you sell, the NAV per share is the amount you receive.
It’s important to note that the NAV does not necessarily reflect a fund’s future performance or potential. It’s simply a snapshot of the fund’s value at the end of the trading day.
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