A fund’s net asset value (NAV) is what the fund is actually worth. It is measured by dividing the total value of the fund’s by the total number of units in circulation. The Net Asset Value (NAV) per unit is also quoted for selling and redeeming unit trusts.
NAV = Total Value of Fund/Total Number of Units in Circulation.
A fund's NAV increases when the value of its holdings increases. For example, if its investments are worth $100 million today, but were worth $95 million a year ago, its NAV will be higher if the number of units has remained constant.
NAV per share is computed once a day based on the closing market prices of the securities in the fund's portfolio. All mutual fund’s buy and sell orders are processed at the NAV of the trade date. However, investors must wait until the following day to get the trade price.
Mutual funds pay out virtually all of their income and capital gains. As a result, changes in NAV are not the best gauge of mutual fund performance, which is best measured by annual total return.
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