A mutual fund's
net
asset value (NAV)
is what the fund is worth, measured
by its current price. NAV is the dollar value of one share of
the fund's stock figured by dividing the current value of the
fund's holdings by the number of shares that investors own.
A fund's NAV increases when the value of
its holdings increases. For example, if its underlying investments
are worth $100 million today, but were worth $95 million a year
ago, its NAV will be higher if the number of shares has remained
constant.
A fund's NAV may also increase if the
value of the investments is unchanged but the number of outstanding
shares drops. And it increases as well in the period between when
distributions are added to the fund and the date on which those
distributions are paid out to the shareholders.
When not to invest
Experts advise against investing in a stock fund just before it makes its annual capital gains and income distributions, usually in December. If you invest then, you'll pay more per share, and owe tax on the amount of the distribution. Then the price will drop to reflect the payout.
A mutual fund's
