What is Net Asset Value?

What is Net Asset Value?

We preferably use Net Asset Value for open-end mutual funds. We determine NAV by summing all the assets, subtracting them by all fund liabilities, and then dividing by the total shares outstanding. You can calculate your assets’ total worth daily at the market’s closing.

Example of NAV:

The NAV =$ \frac{Fund\, Assets-Fund\, Liabilities}{Total\, Shares\, Outstanding} $

Let’s take an example where a company has Fund Assets of USD 100mn and Fund Liabilities of USD 70mn. If the Total Shares Outstanding are 100,000, the NAV would be

NAV =$ \frac{100,000,000-70,000,000}{1,000,000}=30 $

Why is Net Asset Value important?

NAV assists investors in knowing the actual value of the assets after incorporating all the liabilities. One single number gives the value of the assets and is used vividly in the mutual fund industry.