Net Asset Value (NAV) is a closely watched financial ratio that provides an important measure of a fund’s valuation on a per-share basis. NAV essentially is the value of a fund’s assets, minus liabilities, divided by the total number of shares. Fund managers use NAV to track performance so that investors can gauge how their money has fared over time.

For a mutual fund or exchange-traded fund (ETF), NAV reflects market value at the most basic level. Fund sponsors formulate NAVs, using the information of current market prices of the underlying securities that make up the fund. Navs are updated on a daily basis and remain relatively constant if the fund is not adjusted, meaning that no new shares are added to the fund and existing shares are not repurchased.

NAV is an important tool for investors and fund managers in the following ways:

For investors: NAV helps to determine the value of a share in a fund. Knowing their NAV gives investors a better idea of how much exactly they can gain or lose when they buy or sell a fund. They can also compare the fund’s performance against that of other investment funds.

For fund managers: NAV helps fund managers assess the performance of their fund. Knowing the NAV gives them a better insight into how each of their portfolio’s investments is doing.

By examining the NAV, investors and fund managers can identify which investment funds are likely to be stable, and thus make wise investing choices. Obviously, NAVs only reflect the investments the fund owns, not future market trends. Thus, investors must use NAVs in tandem with other research before investing.

Overall, Net Asset Value is a critical measure of valuation and performance for investment funds. The NAV provides investors with an important tool to assess the potential return of their investments, and also provides fund managers with key insights into their fund’s driven performance.