What is the formula for calculating the net asset value of a mutual fund?

The net asset value (NAV) of a mutual fund is calculated as the market value of all its assets minus its liabilities, and this result is then divided by the number of outstanding shares. This formula provides investors with a per-share value of the mutual fund, indicating how much each share of the fund is worth based on the underlying assets minus any liabilities the fund has incurred.

This calculation is crucial for investors, as it helps them understand the value of their investment in the fund regarding the current market conditions and the fund’s overall financial health. By dividing by the number of shares, it gives a clear picture of what each investor's share represents in terms of asset value. This methodology is standard practice in the investment industry, ensuring that investors are informed about the precise value of their holdings.