What is net asset value and how to calculate it?


Net Asset Value (NAV) represents the value of an enterprise. It’s calculated by deducting total liabilities from the company’s total assets. The logic is that although an entity owns assets under consideration. However, they have to pay related liabilities as well. Hence, to calculate the net value of the assets, we must deduct related liabilities.

The value of NAV equals the total value of assets held minus the total liabilities. In other words, it is the value of an asset of the fund less the value of its liabilities per unit.

The net asset value (NAV) shows the net value and is evaluated as the total value of the entity’s assets subtracting the total value of its liabilities. Generally, it is used in the context of an exchange-traded fund or a mutual fund; the NAV represents the fund’s per share/unit price on a specific date or time. Further, Net Asset Value is the cost at which the shares or units of the funds registered with the U.S. Securities and Exchange Commission are traded (invested or redeemed).

Net asset value is usually used to recognize potential investment opportunities within mutual funds, ETFs or indexes. One can also take advantage of net asset value to view the holdings in their portfolio. However, it’s important to note that investment account would be needed to invest in any of the aforementioned assets.


Net asset value (NAV) is estimated by the following formula:

Net Asset Value (NAV)= value of assets – Value of Liabilities


  • The asset’s value is the worth of all the securities in the portfolio
  • Liability’s Value is the value of all liabilities and fund expenses (such as staff salaries, management expenses, operational charges, audit fees, etc).

Components of financial statement

The Net asset value of a mutual fund is calculated by subtracting the total liabilities from the total assets. Since net asset value is characteristically uttered on a unit price basis, that is, net asset value must be divided by the total number of units outstanding. The net asset value is generally represented on a per-share basis. In such a case, the formula to calculate will be:

Net Asset value= (value of an asset- the value of Liabilities)/number of units outstanding

Net asset value and mutual funds:

Net Asset Value (NAV) is often linked with mutual funds and aids an investor in determining whether the fund is overvalued or undervalued. When we talk about open-end funds, Net asset value is essential.

Net Asset Value provides the fund’s value that an investor will be given back at the time of withdrawal of their investments.

The net asset value (NAV) usually appears in the context of mutual funds, as the metric provides the basis for setting the mutual fund share price. Net Asset Value NAV on a per-unit basis exhibits the cost at which units (i.e. ownership shares) in the mutual fund can be purchased or redeemed, which is usually done at the end of each trading day.

How net asset value changes for funds

A Net Asset Value (NAV) of the mutual funds is a function of the value of the market of all securities held in its portfolio.

  • If the value of the investment portfolio held by funds Increases ➝ Net Asset value Increases.
  • If the value of the portfolio decreases ➝ Net Asset Value Declines.

On the other hand, just as in the case of valuing individual public equities, the past performance of a mutual fund is not deep in thought of the future performance. Fund investors should inquire whether the will of the mutual fund’s strategy will continue to perform well into the future or not.

Moreover, the mutual fund’s objective and risk/return profile must be arranged in line with the investors’ criteria.

How does a mutual fund work?

The mutual fund works by collecting money from a large number of investors. It then uses the composed capital to invest in various stocks and other financial securities to achieve the fund’s investment objective.

Each investor gets an individual number of shares in proportion to their invested amount, and they are free to retail (redeem the value of) their fund shares later and pocket the profit/loss. Since standard buying and selling (investment and liberation) of fund shares start after the fund’s launch, a mechanism is essential to price the shares of the fund. This pricing mechanism is based on NAV. As a result, when a mutual fund’s NAVPS updates, so too do its price.

ETFs and Net Asset Value:

Exchanged-traded funds are similar to mutual funds, but they do business more like stocks. ETFs weigh their NAV daily but calculate approximately the NAV every 15 seconds throughout the business day. This estimate is in print on several financial websites. An ETF may do business at the finest or at a discount to its NAV at any given time, depending on the needs.

NAV and fund performance

Comparing a fund’s change in NAV over time may appear to be a good way to work out investment presentation, but that approach ignores some key data. Funds usually distribute income like dividends and interest to shareholders, lowering a fund’s NAV. Mutual funds also give out realized capital gains, lowering their NAV. Looking at the change in NAV among two dates won’t account for these distributions unless you consider all the facts like distribution of a dividend, interest and realised gain etc.


Net asset value or NAV is calculated by deducting assets from liabilities. Net Asset Value NAV is usually a per-share value pre-determined for a mutual fund, ETF, or closed-end fund.

For an investment fund, net asset value is intended at the end of each trading day based on the closing market prices of the portfolio’s securities. For firms, Net asset value can be construed as close to its book value. A firm’s or fund’s shares may do business in the market at levels that move away from its net asset value, that is, NAV.

Net asset value is the value of a fund’s assets minus any liabilities and outflows. The Net Asset Value (on a per-share basis) exhibits the cost at which investors can buy or sell fund units. When the value of the securities in the fund increases, the Net asset value increases. On the contrary, when the value of the securities in the fund decreases, the net asset value decreases.

The net asset value number alone provides no insight into how “good” or “bad” the fund is. The net asset value should be looked at over a timeframe to weigh up the fund’s performance. 

Net Asset Value NAV is a moderately uncomplicated calculation that one will run into often when investing in mutual funds and ETFs. One should understand how and when it was premeditated for funds one is considering and look at total annual return data when comparing fund performance.

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