Net Asset Value - NAV

What is Net Asset Value - NAV?

Net Asset Value (NAV) is the value per unit of a unit trust fund or a mutual fund on a specific date. The per-unit amount is based on the total market value of all the securities in a unit trust fund's portfolio (Total Assets minus Total Liabilities) and divided by the number of units outstanding. Hence, it is the price per unit of the fund which used for subscribing (buy) and redeeming (sell). 

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What is the difference with share price?

Unlike share price which fluctuates throughout the day, NAV per unit is only computed once per day based on the closing market prices of all the securities within the unit trust fund's portfolio. So, investors usually can only get to know the NAV per unit the next day. However, all the subscription and redemption order will be processed using the NAV of the Transaction Date. 

Example:

Investor A bought RM10,000 into Unit Trust X on 10/1/2018 (Transaction Date).

But Investor A can only get to know the NAV he bought on the following day, 11/1/2018. (T+1)

In other words, today you only get to know the NAV of a unit trust fund for the day before.  

What else I need to know?

Unlike share price of a share company, the NAV of a unit trust fund does not depends on demand and supply of the unit trust fund. In order to buy a share at a certain share price, one would need wait for a matching seller and vice versa. But for unit trust fund, one can always make subscription and redemption at anytime. 

From the NAV formula, only increases in Total Assets or decreases in Total Liabilities can directly affect NAV of a unit trust fund. As a result, changes in NAV are not the best gauge of a unit trust fund performance. Many other measures such as Annualized Return, Sharpe Ratio, Alpha, Beta and so on, would be much better indications of a unit trust fund performance.