# Mutual Fund NAV: What It Is and the Formula to Calculate It

## What Is Mutual Fund NAV?

Mutual fund net asset value (NAV) represents a fund's per share market value. It is the price at which investors buy (bid price) fund shares from a fund company and sell them (redemption price) to a fund company.

A fund's NAV is calculated by dividing the total value of all the cash and securities in a fund's portfolio, less any liabilities, by the number of shares outstanding.

### Key Takeaways

• Net asset value (NAV) represents a fund's per-share intrinsic value.
• It is similar in some ways to the book value of a company.
• NAV is calculated by dividing the total value of all the cash and securities in a fund's portfolio, minus any liabilities, by the number of outstanding shares.
• The NAV calculation is important because it tells us how much one share of the fund should be worth.
• The actual market value of a fund may differ slightly from its NAV, which may represent a buying or selling opportunity.

## Understanding Mutual Fund NAV

A NAV computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio's securities. The formula for a mutual fund's NAV calculation is straightforward:

NAV = (Assets - Liabilities) / Total number of outstanding shares

## What Does NAV Mean in Finance?

NAV stands for net asset value. In finance, it is used to evaluate the value of a firm or an investment fund by subtracting its liabilities from assets.

## Where Do You Find the Net Asset Value per Share of a Mutual Fund?

The net asset value per share (NAVPS) of a fund is often reported along with its price quote with a broker or online financial portal. This value will often be close to, but slightly different from, the fund's actual market price since NAVPS is calculated once per day, while the assets held by a fund may change in price throughout the day.

## What Causes a Change in the Net Asset Value of a Mutual Fund?

When the holdings in a fund's portfolio change, the value of the assets of the fund will also change, leading to a change in NAV. Additionally, NAV can change if the fund's liabilities change.

## Is a High NAV Good or Bad?

A high NAV indicates nothing on its own, except that the fund holds a large value of assets. What is important is to compare things on a relative basis, such as the NAV of one growth fund to another. It is also important to compare a fund's NAV to its market price. If the NAV is much higher than the current market price, it may signal a good buying opportunity.

## Is NAV Same As Book Value (BV)?

Book value is used to evaluate the intrinsic value of a particular company, by subtracting the firm's liabilities from its assets found on its balance sheet. This is a similar calculation to a fund's NAV, but a fund's assets are themselves shares of companies (in many instances).

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