Discount To Net Asset Value

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DEFINITION

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".

INVESTOPEDIA EXPLAINS

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


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