The formula
NAV = (Total Assets − Total Liabilities) ÷ Shares Outstanding
If a fund holds $500 million in securities, has $2 million in liabilities, and has 10 million shares outstanding: NAV = ($500M − $2M) ÷ 10M = $49.80 per share.
NAV for ETFs vs mutual funds
Mutual funds: You buy and sell at the end-of-day NAV. There's no intraday trading.
ETFs: Share prices fluctuate throughout the trading day based on supply and demand. The underlying NAV is also calculated continuously. The difference between market price and NAV is the premium (trading above NAV) or discount (trading below NAV).
For major, liquid ETFs like SCHD, VYM, or VIG, the premium/discount is typically tiny — often less than 0.05%. For less liquid ETFs, especially during market stress, the spread can widen. This is one reason sticking to high-volume dividend ETFs reduces execution friction.
NAV and dividend investing
When a dividend ETF goes ex-dividend, its NAV falls by approximately the dividend amount (since the cash paid out leaves the fund's assets). This is why the share price of a dividend ETF typically drops on ex-dividend date — it's a mechanical adjustment, not bad news.
For long-term investors using DRIP, this daily NAV fluctuation is mostly background noise. What matters is the income generated and the long-run total return.
Related terms
- ETF — the fund structure where NAV and market price can briefly diverge
- Ex-dividend date — when NAV falls by the dividend amount
- Expense ratio — the daily fee deducted from NAV automatically