What is NAV?

NAV, or Net Asset Value, is a key term in mutual funds that represents the per-share value of the fund. It is calculated by subtracting the total liabilities of the fund from its total assets and then dividing by the number of outstanding shares. Essentially, NAV reflects the market value of each share of the mutual fund at the end of the trading day.

NAV=(Total Assets - Total Liabilities)          Number of Outstanding Shares

Here’s a simplified formula for NAV:

Total assets include all the investments in the mutual fund's portfolio, plus any cash or cash equivalents. Total liabilities are all the debts and obligations the fund owes. The NAV is calculated at the end of each trading day based on the closing prices of the fund’s investments.

Investors use the NAV to determine the value of their investments in the mutual fund. When you buy or sell mutual fund shares, the transactions are executed at the NAV of the trading day on which the order is placed. NAV is crucial for understanding the performance of a mutual fund over time.