by Juan Leer

Created on: March 25, 2007   Last Updated: April 14, 2007

The net asset value (NAV) of a mutual fund is just a simple way of looking at the fund's assets minus its liabilities. To put it another way, NAV equals the fund's worth. If a fund has assets of $80 million and liabilities of $40 million, it would have a NAV of $40 million.

This is an important number to investors, because it is from the NAV formula that the price per unit of a fund is calculated. By dividing the NAV of a fund by the number of outstanding units or shares, you are left with the price per unit. In the example given above, if the fund had 4,000,000 shares outstanding, the price-per-share value would be $40 million divided by 4,000,000, which equals $10 per share.

The NAVs of funds are continually changing so obviously the price per share in the funds are also constantly changing. Funds usually wait until the end of each trading day to recalculate their NAV and individual share prices.

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