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

RELATED TERMS
  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 ...
Related Articles
  1. Mutual Funds & ETFs

    Open Your Eyes To Closed-End Funds

    Although less popular than their open-ended counterparts, these investment vehicles are worth a second look.
  2. Markets

    Valuing A Stock With Supernormal Dividend Growth Rates

    If these calculations are off, it could drastically change the value of the shares.
  3. Mutual Funds & ETFs

    Top 3 UBS Global Funds for Retirement Diversification in 2016

    Learn about UBS's asset management business, past mutual fund performance and the top three UBS mutual funds to consider for retirement diversification.
  4. Mutual Funds & ETFs

    Invesco’s Top Funds for Retirement

    Here's a list of Invesco investments—retirement funds—that may work for you if you have the time to let them mature over the long term.
  5. Mutual Funds & ETFs

    Top 4 Royce Funds for Retirement Diversification in 2016

    Discover four of The Royce Funds mutual funds suitable for diversifying retirement portfolios that focus on investing in small-cap companies.
  6. Mutual Funds & ETFs

    Top 3 VALIC Funds for Retirement Diversification in 2016

    Learn about the VALIC fund family, its performance relative to its peers and the top three VALIC funds to consider for retirement diversification in 2016.
  7. Mutual Funds & ETFs

    The 4 Best T. Rowe Price Funds for Growth Investors in 2016 (TROW)

    Discover the four best mutual funds administered and managed by T. Rowe Price that specialize in investing in stocks of growth companies.
  8. Mutual Funds & ETFs

    The 3 Best T. Rowe Price Funds for Value Investors in 2016

    Read analyses of the top three T. Rowe Price value funds open to new investors, and learn about their investment objectives and historical performances.
  9. Mutual Funds & ETFs

    Top 3 Lazard Funds for Retirement Diversification in 2016

    Learn about Lazard Asset Management, its long history of strong performance and the top three Lazard funds to consider for retirement diversification.
  10. Investing Basics

    How liquid are Fidelity mutual funds?

    Review the liquidity features of mutual fund shares and an overview of Fidelity mutual funds. Most investors look for convenient access to their investments.
RELATED FAQS
  1. What is a mutual fund's NAV?

    Net asset value (NAV) represents a fund's per share market value. This is the price at which investors buy ("bid price") ... Read Full Answer >>
  2. Why do some closed-end mutual funds trade above or below their net asset values?

    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 >>
  3. How liquid are BlackRock mutual funds? (BLK)

    BlackRock, Inc. (NYSE: BLK) mutual funds are very liquid, as are all mutual funds. An investor receives payment for a redemption ... Read Full Answer >>
  4. Are target-date retirement funds good investments?

    The main benefit of target-date retirement funds is convenience. If you really don't want to bother with your retirement ... Read Full Answer >>
  5. Do mutual funds require a demat account?

    A dematerialized account enables electronic transfer of funds. The account is used so an investor does not need to hold the ... Read Full Answer >>
  6. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
Hot Definitions
  1. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  2. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  3. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  4. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  5. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center