NAV is the price per share of a mutual fund, calculated by dividing the fund's total assets minus its debts by the number of shares outstanding

NAV stands for Net Asset Value. When you buy or sell shares in a mutual fund, you are buying or selling at the NAV price for that day. The fund manager adds up everything the fund owns — stocks, bonds, cash — subtracts what the fund owes, and divides by the number of shares. That number is your NAV. It changes every trading day because the value of what the fund holds changes every trading day.

NAV is not the same as a stock price. A stock price moves throughout the day as people buy and sell. A mutual fund's NAV is calculated once per day, usually after the market closes at 4 p.m. Eastern time. If you place an order to buy or sell a mutual fund share during the trading day, you will not know the exact price until after the market closes and the NAV is published.

Key Takeaways

  • NAV is calculated once per day after the market closes and is the only price at which you can buy or sell mutual fund shares.
  • The NAV changes daily because the stocks and bonds inside the fund gain or lose value.
  • You cannot predict the exact NAV when you place a trade during the day — you find out the price after the market closes.
  • A higher NAV does not mean a fund is better; it simply reflects what the fund's holdings are worth on that particular day.

How NAV is calculated each day

The fund manager takes a snapshot of the market value of every holding in the fund at the close of trading. If the fund owns 10,000 shares of Company A at $50 per share, that position is worth $500,000. The manager does this for every stock, bond, and cash position. All those values are added together to get the fund's total assets.

Next, the manager subtracts any liabilities — money the fund owes, such as management fees accrued or borrowed cash. The result is the fund's net assets. That number is then divided by the number of fund shares outstanding. If the net assets are $100 million and there are 10 million shares outstanding, the NAV is $10 per share.

This calculation happens once per day, after 4 p.m. Eastern time, when all U.S. stock and bond markets have closed. The NAV is published by the fund company and appears on financial websites, your brokerage account, and fund fact sheets.

Why NAV changes every day

The stocks and bonds inside a mutual fund change in value every trading day. If a fund holds 100 different stocks and 50 of them go up while 40 go down and 10 stay flat, the fund's total value shifts. That shift changes the NAV. A fund that holds bonds will see NAV changes when interest rates move, because bond prices move in the opposite direction of rates.

NAV also changes when the fund pays dividends or makes capital gains distributions. When a fund distributes money to shareholders, the fund's assets shrink, which lowers the NAV. This is normal and expected — it does not mean the fund performed poorly. The shareholder receives the distribution, and the NAV adjusts downward to reflect that the cash has left the fund.

The difference between NAV and share price

For mutual funds, NAV and share price are the same thing. You buy and sell at NAV. This is different from a closed-end fund or an exchange-traded fund (ETF), where the share price can trade above or below NAV because those funds trade on an exchange like a stock. A mutual fund does not trade on an exchange — it trades directly with the fund company at NAV.

A stock has a price that changes throughout the day as buyers and sellers make trades. A mutual fund has a NAV that is set once per day. If you call your broker at 2 p.m. and place an order to buy a mutual fund, you will not pay the NAV from 2 p.m. You will pay whatever the NAV is after the market closes, even if you placed the order hours earlier.

What a rising or falling NAV tells you

A rising NAV means the fund's holdings have increased in value. If you own shares, the value of your investment is growing. A falling NAV means the fund's holdings have decreased in value, and your investment is worth less. Over longer periods, comparing NAV changes shows you how the fund has performed.

However, a higher NAV does not mean a fund is better than a fund with a lower NAV. A fund with a NAV of $50 per share is not automatically better than a fund with a NAV of $20 per share. The NAV depends on how long the fund has been running, how much it has grown, and whether it pays dividends. What matters is the percentage change in NAV over time, not the absolute number.

How to use NAV when comparing funds

When you compare two mutual funds, look at the percentage return over the same time period — one year, three years, five years — not the NAV itself. A fund that started five years ago with a NAV of $10 and now has a NAV of $15 returned 50 percent. A fund that started with a NAV of $50 and now has a NAV of $60 returned 20 percent. The second fund has a higher NAV but lower returns.

You can also look at the NAV history to see how stable a fund is. A fund whose NAV swings wildly up and down is more volatile than a fund whose NAV climbs steadily. This tells you something about the risk you are taking. Fund companies publish historical NAV data on their websites, and financial sites like Morningstar track it as well.

Why you cannot lock in a mutual fund price during the day

When you place an order to buy or sell a mutual fund during trading hours, you are placing an order at an unknown price. The fund company does not know what the NAV will be until after the market closes. This rule protects long-term shareholders from traders who might try to exploit intraday price movements. Everyone who trades on the same day gets the same NAV, calculated after the market closes.

This is one reason mutual funds are considered long-term investments. You cannot time a trade to the minute the way you can with a stock. If you need to sell quickly, you will get whatever NAV is set after the market closes that day, which could be higher or lower than you expected.

Frequently Asked Questions

Does a higher NAV mean the fund is doing better?

No. A higher NAV simply means the fund's holdings are worth more per share on that day. What matters is the percentage gain or loss over time. A fund with a NAV of $50 that rose from $40 performed better than a fund with a NAV of $100 that rose from $95, even though the second fund has a higher NAV.

Can I buy a mutual fund at a specific price during the day?

No. You can place an order anytime during the trading day, but you will pay the NAV calculated after the market closes at 4 p.m. Eastern time. You will not know the exact price when you place the order.

Why did my fund's NAV go down if I did not sell any shares?

The stocks or bonds inside the fund lost value, or the fund paid a dividend or capital gains distribution. Both are normal. A falling NAV does not mean you made a bad choice — it means the market value of the fund's holdings decreased that day.

How often is NAV updated?

NAV is calculated and published once per day, after the U.S. stock and bond markets close at 4 p.m. Eastern time. You can see the updated NAV on the fund company's website, your brokerage account, or financial websites the next morning.

Is NAV the same for all investors in the same fund?

Yes. Everyone who buys or sells shares of a mutual fund on the same day pays or receives the same NAV. The fund company calculates one NAV per day, and all trades that day settle at that price.