Net asset value is the price obtained by valuing at market the stocks, bonds, and other assets held by a mutual fund, converted into a value per unit (typically per 10,000 units).
How it differs from a stock price
While a stock's price moves in real time during trading hours based on supply and demand, an ordinary mutual fund's net asset value is calculated once per day, based on the total market value of the fund's assets for that day minus fees such as the expense ratio, divided by the number of units outstanding. Purchase and redemption orders are executed after the net asset value for the day has been determined.
What to keep in mind
The trend in net asset value is used as a reference for evaluating investment performance, but a simple comparison that does not account for cumulative distributions paid since inception can give a misleading picture of actual performance. Past net asset value trends do not guarantee future price movements.
This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.
Frequently Asked Questions
Does the net asset value change multiple times a day?
No, in principle the net asset value is calculated only once per day, based on the market valuation of the fund's assets for that day. It does not fluctuate in real time during trading hours the way a stock price does (a listed ETF is an exception, since its price does move in real time).
Is a fund with a higher net asset value a better fund?
No. The absolute level of the net asset value simply reflects the cumulative investment performance since the fund's inception, so the level alone cannot be used to judge whether one fund is superior to another. It is important to also check the fund's investment policy and its historical rate of return.
