Editing Net asset value (section)

==Open-ended funds==
Net asset value is commonly used in the context of [[open-end fund]]s. [[Shares]] and [[Partnership|interests]] in such funds are not traded between investors, but are issued by the fund to each new investor and redeemed by the fund when an investor withdraws. A fund will issue and redeem shares and interests at a price calculated by reference to the NAV of the fund, with the intention that new investors receive a fair proportion of the fund and redeeming investors receive a fair proportion of the fund's value in cash.

For example, if a fund has a NAV of $200 million and 1 million shares in issue on a certain day, the "NAV per share"—the price at which shares are issued—is $200. A person investing $40 million on that day will therefore be given 200,000 shares. Immediately following their investment the total NAV of the fund will be $240 million, as the new investor's cash becomes part of the fund and is available for investment by the fund. The investor will then be entitled to 1/6 of whatever the fund's value is when they withdraw their investment, if in the meantime their 1/6 ownership is not altered by any further withdrawals or investments to the fund.

The valuation of the assets and liabilities of an open-ended fund is therefore very important to investors. If the NAV in the above example had, with the same assets, been calculated as $160 million (and the NAV per share as $160), the investor would have been given 250,000 shares and would become entitled to 1/5 of the fund's value.

In contrast, [[closed-end fund]]s are traded in the open market between investors, bought and sold at market prices and not based on NAV.<ref>{{Cite web |first= |title=The Importance of Net Asset Value (NAV) Within Closed-End Funds |url=https://www.cefa.com/Learn/Content/CEFBasics/netassets.fs |access-date=2022-12-21 |website=Closed-End Fund Association}}</ref> So the price of shares or interests in a closed-end fund will be whatever the parties agree it to be, which may not correspond to the fund's NAV. [[Publicly traded]] shares in such funds generally trade at a price below NAV.