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NAV helps investors assess the value of a fund’s shares and is crucial for pricing mutual fund transactions. It ensures transparency and consistency in fund valuation, especially for open-end funds where shares are bought and sold based on the NAV.
For most mutual funds, NAV is calculated and published at the end of each trading day. However, some funds, like hedge funds or private equity funds, may calculate NAV weekly, monthly or quarterly depending on their structure and investment strategy.
NAV reflects the intrinsic value of a fund’s assets, while the market price (especially for closed-end funds or ETFs) can differ due to supply and demand. Closed-end funds often trade at a premium or discount to their NAV.
While NAV is primarily used for funds, a similar concept applies to companies as “book value.” Value investors may compare a company’s NAV (or book value) to its market capitalization to identify undervalued stocks.
