Net Asset Value (NAV) is the per-share dollar value of a mutual fund or ETF, calculated daily (for mutual funds) by dividing total net assets by the number of shares outstanding.
Formula: > NAV = (Total Assets − Total Liabilities) ÷ Number of Shares Outstanding
Example: - Fund assets: $500 million - Fund liabilities: $5 million - Shares outstanding: 10 million - NAV = ($500M − $5M) ÷ 10M = $49.50 per share
Mutual fund pricing: - Open-end mutual funds are priced once per day, after the market close (typically 4:00 PM ET). - All orders received during the day (buy or sell) execute at the next calculated NAV — this is called forward pricing. - Investors buy at NAV + sales load (if applicable) and sell (redeem) at NAV.
ETF vs. mutual fund NAV: - ETFs trade on exchanges throughout the day at market prices, which may differ from NAV (premium or discount). - Authorized participants use an arbitrage mechanism to keep ETF market prices close to NAV.
Closed-end fund NAV: - Closed-end funds have a fixed number of shares and trade on exchanges. - They can trade at a premium (market price > NAV) or discount (market price < NAV) to NAV.
> Exam tip: Mutual funds price at next NAV (forward pricing — no market timing). ETFs trade intraday. Closed-end funds can trade at premium/discount to NAV. Know these distinctions for the Series 7 and Series 65.