Net Asset Value(NAV)
When we speak of the value of a share of stock, we say that it is worth a specific dollar amount. The value of a share in a mutual fund is referred to as its Net Asset Value per share or NAV. When you buy mutual fund shares, you pay the current NAV per share, plus any sales charge (also called a sales load). When you sell your shares, the fund will pay you the total NAV value at the time of the sale, less any other sales load. A fund’s NAV goes up or down daily as the value of the individual holdings in the fund changes.
As an example, suppose you invest $1,000 in a mutual fund with an NAV of $10. You will therefore own 100 shares of the fund. If, after you make your investment, the NAV of the mutual fund drops to $9 (because the value of the fund’s portfolio has dropped), you will still own 100 shares, but your investment will be worth $900. If after you make your investment, the NAV goes up to $11, your investment will be worth $1,100. (This example assumes no sales charge.)