How is the NAV of a mutual fund calculated?

The net asset value (NAV) of a mutual fund is determined by calculating the total value of all the fund's assets and subtracting any liabilities, then dividing that figure by the number of outstanding shares. This process gives an accurate reflection of the value of each share in the mutual fund, enabling investors to understand how much one share is worth at a given time.

In detail, the total assets include stocks, bonds, cash, and other securities held by the fund, while liabilities encompass any debts or obligations the fund owes. By taking the difference between these two numbers, you derive the total net assets of the fund. Finally, dividing that result by the number of shares outstanding ensures that the NAV accurately represents the per-share value based on the fund's total assets and liabilities. This method is the standard industry practice for calculating NAV and is essential for transparency in mutual fund pricing.