What Is Net Asset Value (NAV)

What is net asset value (NAV)?

NAV is an abbreviation of the term Net Asset Value. NAV describes the current market value of a fund unit. Unlike when you trade with individual securities, a fund consists of several securities, which means that their total value constitutes the fund’s price.

Understanding net asset value (NAV)

To be able to calculate the net asset value, you need to have access to the company’s balance sheet and also how many shares have been issued.

In the balance sheet, it is equity that you want information about, ie assets minus liabilities that equity entails.

The very definition of net asset value is then:

Net asset value = Equity (Assets – Liabilities) Number of shares.

It can be interesting to think a little about what equity really is for the limited company. This capital is not really the company’s own money but the company’s debt to the shareholders.

The equity is thus the part of the company that belongs to the shareholders.

When equity is calculated by taking assets – liabilities from the balance sheet, this is usually also called the book equity or the visible equity.

It is also possible to use adjusted equity (JEK) in the calculation. This is sometimes defined by the company in the accounts or you can calculate this yourself.

If you are to make this calculation yourself, it is usually possible to use JEK = Equity + Untaxed reserves after tax.

To interpret and understand net asset value

  • The difficulty with interpreting the net asset value is thus about correctly valuing the assets in the company and thus the equity. It is especially in industrial companies that this is difficult.
  • On the other hand, the net asset value is usually easier to calculate in investment companies where the value is easier to calculate. These types of companies primarily own shares in other companies and the net asset value thus says in a clearer way what the share price looks like in relation to the net asset value. It is in these contexts that it is usually mentioned that investment companies are traded at a substantial discount, ie that the net asset value of the company is higher than what the share price shows.
  • It is also possible to use adjusted equity in the calculation of net asset value. Sometimes this is stated by the company in the accounts, sometimes you need to calculate this yourself.

What is the fund’s exchange rate and how is it calculated?

Unlike shares, there is no buy or sell price for funds, instead there is something called a fund price, or unit price.

The fund price is also called the NAV price and it is calculated every time the fund is traded.

The course is set by first adding up all the fund’s assets, then deducting the fees that the fund has, such as the management fee.

The sum, which is also called fund assets, is then divided by the number of fund units that the fund has and then the NAV rate is obtained.

In other words, when you look at the fund’s development, all fees have already been deducted. It is also usually called a fee-adjusted course.


Fund assets / Number of fund units = NAV price

What does NAV mean?

NAV stands for Net Asset Value and is the current market value for a fund unit. NAV can also be called a unit price or fund price.

How is the fund price affected?

Since the share price is the fund’s assets divided by the number of fund units, it is changes in the fund’s assets that affect the fund’s price.

If the fund’s assets decrease or increase in value, the unit value will also decrease or increase.

When are the fund prices set?

It depends on the fund company and the fund, but common for Swedish funds is that the price is determined, for example, at 4pm or after the Stockholm Stock Exchange closes at 5:30pm.

The units’ unit value is determined when it is traded, at most only once a day, unlike shares whose value is priced each time a transaction takes place, continuously throughout the day.

Does the break time affect the return on a fund?

No, in the long run the breaking time does not matter. However, it can affect what the return for a fund looks like on a given day.

For example, if the stock market rises sharply at the end of the day, after a fund’s NAV has been calculated, the rise will only be visible when the next day’s price is calculated.

This can become especially clear when the stock market is moving strongly.

How many fund units do I get when I buy?

How many shares you get depends on what the share price is and how much money you want to buy for. Your purchase price divided by the fund price shows the number of shares you will receive.

Purchase price / Fund price = Your shares
You buy a fund for 100,000 with a NAV price of $195. That gives you 512.8 fund units in the fund.

100,000 / 195 = 512.8 shares

Is it important to take the NAV into account when buying or selling funds?

If you trade in shares, you can look at the share’s buy and sell price and try to trade strategically, but since a fund’s NAV price is not updated continuously, there is no point in using the same strategy when buying funds.

When you invest in a fund, the purchase will not go through until the break, and then it is determined how many fund units you get for the money.

If the NAV rate then goes up to the next break, the value of your investment will increase, and vice versa.

Is it possible to trade funds strategically based on the net asset value (NAV)?

It is possible to examine what a fund’s holdings are and find out the specific development of the securities in order to see approximately what return the fund will show on a given day.

But since all buy or sell orders still take place at the NAV price at the break, it gives no advantage to know how the fund develops.

The best strategy when trading in mutual funds is to read on and invest in some that you believe in.

Frequently asked questions about net asset value (NAV)

1. How is a fund’s net asset value calculated?

To obtain a fund’s net asset value, the fund’s assets are summed, excluding fees. Thereafter, the sum is divided by the number of units the fund has.

2. Who produces the NAV course?

It is the fund companies that produce the NAV for their funds. The NAV is usually calculated every weekday.

3. When is the NAV updated?

It can differ between different fund companies and funds, but usually every weekday.

4. Can I assess whether a fund is worth investing in based on its NAV?

No, the NAV is not very relevant in that case. Instead, look at the type of holdings the fund has and consider whether you want to invest in them.

What is a low net asset value – net asset discount

The company has its own estimated value of its assets, but the market may have another.

It can therefore be difficult for some companies to apply the net asset value, and see if you can find a net asset value discount.

If the calculation of the net asset discount shows a ratio that is lower than the stock exchange’s valuation of the company, the company may be worth buying.

This is because the company is valued lower by the stock market than the stock exchange values the individual holdings.

Net asset discount investment company

As a result, by buying a holding in an investment company, you can in some cases get a substantial discount.

This means that the price you pay for assets in the company is lower than if you yourself go out and acquire the companies, or the company, that make up the investment company’s equity portfolio.

The same can be said about real estate companies.

An investment in the real estate company’s equity, ie you buy a share in the company, is always advantageous if the cost of the number of shares is lower than the relative share of the company’s own assets.

What is a high net asset value – net asset premium

Sometimes inefficiency occurs in the stock market.

A good example is when an investment company is traded at a higher valuation than if you yourself as an investor buy together the same portfolio on the stock exchange.

The ratio between equity and the company’s liabilities is thus higher than the value of its share price.

Substance premium investment company

The phenomenon is referred to as a substance premium and is common on various stock exchange forums.

This premium is not desirable and according to financial theory it is always negative to invest in companies where you pay a substantial premium.

You can simply go out and buy the same holding directly on the stock exchange instead and get a better price, potentially brokerage deducted.

How to find net asset value

Lots of investors, especially beginners, are wondering where they can find net asset value per share. This is done through a net asset value calculation.

To do this, a simple calculation was used, with two input variables. You simply divide the company’s equity, ie assets minus liabilities, by the number of shares.

But there are other approaches, namely to look directly at companies’ websites. For example, many investment companies tend to have a tab on their website that shows the net asset value.

An example is industrial values that provide the information to their investors directly on the website.

A net asset value template is thus to open the company’s annual report, identify equity and divide by the number of shares.

What is a good net asset value

A good net asset value means that the company is traded at a lower valuation than the latest share price.

You always calculate the net asset value by dividing equity by the number of shares in the company.

Some people wonder if the quota can be negative. The answer to the question, “can a net asset value be negative?” is yes.

This happens if the company has larger liabilities than assets, when you divide a negative value by the number of shares. That’s not a good sign.

How to see a net asset value discount

Now that you know that you calculate a share’s net asset value ratio by dividing equity in the company by issued shares, you can see the net asset value.

This is of course good, but interpreting the quota and seeing if you trade the company’s shares is traded at a discount or premium is crucial.

Regardless of whether it is a real estate company or a company within the investment niche, the value of the quota is always used to indicate whether you can make a good deal.

If, for example, the ratio you have calculated, assets minus liabilities divided by the number of shares, is lower than the stock exchange’s valuation of the share, the share is traded at a discount.

Namely, you can buy some of the assets at a lower price by buying the individual share, rather than going out and acquiring the holdings directly.

Thus, you see a net asset value discount by comparing net asset value with the stock market’s valuation of the assets that the company holds.

The method is still used by professional investors who follow the company, and small savers.

Net asset value history

When analyzing companies, you can look at several factors. What does organic growth look like? How has the company performed historically? Does the company have high debts and is equity used in a good way?

By comparing today’s net asset value with historical net asset value, you can see how the company’s management is performing.

Especially in the investment niche where the company always strives to make better returns than the stock market as a whole.

Historical net asset value in relation to the valuation of the holdings may also indicate how the stock exchange has valued other factors, such as confidence in the board.

An alternative interpretation of a low net asset value is that the stock exchange believes that the board is not navigating the company in the right direction, something that can be seen in the share price.

In other words, the stock market believes that the company’s equity can be used more efficiently and instead chooses to invest in other shares.

Equity and liabilities

Equity is extremely important for a company. Namely, it gives leeway to navigate troubled markets, or take advantage of business opportunities.

Thus, equity is an extremely important variable when looking for companies to invest in.

Even low debt can be beneficial for the same reason. If a company has a low proportion of debt, they can borrow money when business opportunities arise.

This applies not least to companies whose business concept is to invest in another company’s share.

With the help of equity and the number of shares, you can calculate the net asset value of the investment companies, and see if its shares are attractive investments.

To see if a company has strong equity, you can turn to the video below:

Summary of net asset value

Net asset value is a key ratio where equity and number of shares are set in relation. The calculation is made according to the formula below:

Net asset value = (Assets – Liabilities) / Number of Shares = Equity / Number of Shares

The company’s equity can be compared more easily with the market valuation for some companies than others.

Therefore, net asset value is usually used to create an image of investment companies and real estate companies.

There is often talk of a net asset discount and a net asset premium. net asset discount means that the assets minus liabilities can be bought cheaper through an investment in the company than by putting together a portfolio of the assets that the company owns.

The opposite applies to net asset premiums, where equity / number of shares indicates that it is more expensive to buy shares in the company than to buy shares directly in the holding companies.










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