What does Net Asset Value (NAV) mean?

The net asset value," or "NAV," of an investment organization is the organizations total assets less its total liabilities. For example, if an investment company has assets worth $10 million and liabilities of $1 million, the investment company’s NAV is $9 million.


NAV for Mutual Funds:

This term has been extended to mutual funds as well. In the case of mutual funds, the Net Asset Value (NAV) of a mutual fund is the price per share. It is calculated by dividing the total value of all the securities in its portfolio, less any liabilities if any, by the total number of fund shares that are outstanding. Units in open ended funds are valued using this measure. The NAV is calculated at the ned of each day (after trading has been stopped) by taking the closing market value of all securities owned plus all other assets such as cash, subtracting all liabilities, then dividing the result (total net assets) by the total number of shares outstanding. For example, if a fund had net assets (considering the assets less liability) of $50 Million and there are 10 million shares of the fund, then the price per share or NAV) is $5. The popular mutual funds publish their per share NAVs in the daily newspapers.

Is the NAV the best metric to evaluate the fund performance?

As the mutual funds pay out virtually all of their income and capital gains, changes in NAV are not the best gauge of mutual fund performance. Financial researchers consider the annual total return as the best way to evaluate the performance of mutual funds.

So when any one talks about NAV please ensure that the context is known as the definition of NAVs is highly dependent on the context.

A very comprehensive article related to NAV is available at the SEC site at http://www.sec.gov/answers/nav.htm