Net Asset Value (NAV)


Although technically synonymous with book value, net asset value (NAV) is commonly used to refer to the value of the holdings of mutual funds. NAV is important to mutual fund investors because it determines the price at which an investor can purchase or sell mutual fund shares. For instance, if a fund's NAV is $100MM and it has 10 million shares, each investor can purchase or redeem shares at a price of $10. The NAV is calculated by subtracting a mutual fund's liabilities (management fees, money owed to lending banks etc.) from the funds assets (all the stocks, bonds, cash and other assets it has under management). NAV is calculated once a day at the end of the day based on the closing market prices of the funds underlying assets. This means that NAV can differ markedly from the total market value of the actual assets.

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