NAV — what is Net Asset Value?
Definition of NAV (Net Asset Value) — the net asset value of a fund. How it's calculated, what it's used for, and why it's important for investors.
Definition
NAV (Net Asset Value) is the net asset value of an investment fund, calculated as the sum of all fund assets minus liabilities, divided by the number of units issued.
Formula
NAV = (Fund assets - Liabilities) ÷ Number of units
How does it work in practice?
Let's say a fund has:
- Stocks worth 100 million PLN
- Bonds worth 50 million PLN
- Cash: 10 million PLN
- Liabilities: 2 million PLN
- Number of units: 1 million
NAV = (160 million - 2 million) ÷ 1 million = 158 PLN per unit
NAV in traditional funds vs ETFs
Traditional funds (TFI)
- NAV calculated once per day (after session close)
- You buy/sell always at NAV from the order day
- Price = NAV
ETFs
- NAV calculated during the day (iNAV — indicative NAV)
- Market price of ETF may slightly deviate from NAV
- The difference (premium/discount) is usually minimal (<0.1%) thanks to arbitrage mechanism
Why is NAV important?
- Allows you to assess whether an ETF is trading at a premium or discount
- Used to calculate fund returns
- Serves as the basis for unit valuation when buying/selling traditional funds
Premium and discount
- ETF trades at premium (price > NAV) — investors want to buy more than there are assets
- ETF trades at discount (price < NAV) — the opposite
With large, liquid ETFs, the difference is negligible. With niche ETFs from exotic markets — it can be larger.
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