What is an ETF’s Market Price and NAV?
In the world of ETFs there are many terms used to explain different moving parts of the market and/or funds. In this article we explain two terms: What is ETF Market Price? What is NAV (Net Asset Value)?
ETF Market Price
When an investor buys or sells an ETF through his brokerage platform or through a financial advisor, he interacts with a quote (a bid or offer) provided by a stock exchange. Unlike mutual funds, ETFs can trade intra-day and in real-time. The bid is the ETF Market Price at which buyers are willing to buy units of an ETF; the ask/offer is the price at which sellers are willing to sell.
NAV (Net Asset Value)
After the market closes, an end-of-day NAV (Net Asset Value) for each ETF is struck. It is calculated by the ETF fund company or their service provider/fund accountant, using the official closing prices of the ETF’s underlying securities, minus management fees and expenses. It is an indication of the fair value of a single share of an ETF. Additionally, NAV values are used to calculate performance returns of the ETF over time.
This article was written in collaboration with Trackinsight.
