Discount To Net Asset Value


DEFINITION of 'Discount To Net Asset Value'

A pricing situation that occurs with a closed-end mutual fund when its market price is currently lower than the net asset value of its components. Discounts can occur in times where the market has a pessimistic future outlook and fund investors have started to sell their holdings.

Also known as "discount to NAV".

BREAKING DOWN 'Discount To Net Asset Value'

This phenomenon only occurs in closed-end funds. Open-end funds, on the other hand, are not as affected by supply and demand because they are bought and sold at prevailing net asset values.

While a discount NAV could be an indication that the underlying assets in a fund will dip in value, it could also be a temporary market over-reaction. Moreover, the fund manager may decide to buy back shares of the fund to remove the discount and restore the fund's value back to its net asset value

  1. Asset Value Per Share

    The total value of a fund's investments divided by its number ...
  2. Net Asset Value - NAV

    A mutual fund's price per share or exchange-traded fund's (ETF) ...
  3. Closed Fund

    A mutual fund that has been closed - either temporarily or permanently ...
  4. Net Asset Value Per Share - NAVPS

    An expression for net asset value that represents a fund's (mutual, ...
  5. Open-End Fund

    A type of mutual fund that does not have restrictions on the ...
  6. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
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  1. What is a mutual fund's NAV?

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    Intuition tells us that a mutual fund's net asset value (NAV) (the net value of all assets within the mutual fund's portfolio ... Read Full Answer >>
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