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Understand how NAV and share price differ in meaning, calculation approach, and how each is referenced in market contexts.
NAV and share price are both used to describe value, but they apply to different financial instruments and are derived through distinct processes. One is based on underlying asset values and balance-sheet figures, while the other reflects trading activity in the market. Comparing the two helps clarify how value is represented across pooled investment vehicles and listed companies, without relying on a single valuation method.
Net Asset Value (NAV) represents the value of an entity's assets minus its liabilities, commonly used for mutual funds, ETFs, and investment portfolios. It is calculated by dividing the total value of assets in the fund by the number of shares outstanding. NAV provides a snapshot of the underlying value of an asset or fund, serving as a key indicator for evaluating performance.
Share price is the market value of a company’s stock, determined by the demand and supply of shares in the open market. It fluctuates based on various factors, including market conditions, investor sentiment, company performance, and overall economic environment. Unlike NAV, share price is not directly tied to the company's actual asset value but is instead influenced by the perception of its future growth and profitability.
In the share market, NAV is primarily used in mutual funds and exchange-traded funds (ETFs). It represents the value of the assets held by the fund and is a reflection of the fund's performance. For individual stocks, NAV is not directly applicable, as the share price is determined by the market and not by the intrinsic value of the company's assets.
The core difference between NAV and share price can be summarised in the table below:
| Aspect | NAV | Share Price |
|---|---|---|
Calculation |
Value of assets minus liabilities, divided by shares outstanding |
Determined by supply and demand in the market |
Usage |
Used for mutual funds and ETFs |
Used for individual stocks in the stock market |
Volatility |
Relatively stable, changes based on asset value |
Highly volatile, influenced by market perception and demand |
Market Factors |
Not directly influenced by market sentiment |
Highly influenced by market sentiment, news, and company performance |
NAV is calculated using the following formula:
NAV = (Total Value of Assets - Total Liabilities) / Outstanding Shares
This calculation provides a snapshot of what each share of a fund is worth, based on the market value of the assets held by the fund, minus any liabilities. It is generally calculated at the end of each trading day for mutual funds and ETFs.
A share price is influenced by multiple market-related and company-specific factors that affect how investors value a stock.
Demand and supply
When more investors want to buy a share than sell it, the price tends to rise. When selling pressure is higher, prices usually fall, reflecting the immediate balance in the market.
Company performance
Financial results, revenue growth, profitability, and future business prospects influence how investors assess the company’s value and decide whether to buy or sell.
Market sentiment
News, corporate announcements, global events, and overall investor confidence can affect expectations and lead to short-term price movements, even without major changes in fundamentals.
Macroeconomic factors
Economic growth, inflation, interest rates, and geopolitical developments can impact business conditions and investor behaviour, which may influence share prices across the market.
Together, these factors shape how the market values a company at any given time and explain why share prices can change frequently.
The main difference between NAV and share price lies in the fact that NAV represents the actual value of assets, while the share price reflects market sentiment and investor perception. While NAV is a fundamental valuation of the underlying assets, share price is more influenced by expectations about the future of the company, its industry, and the broader market.
Understanding the difference between NAV and share price is essential for making informed investment decisions. NAV provides a more stable and intrinsic value based on actual assets, while share price is highly influenced by market forces and investor sentiment. Both metrics offer complementary insights when evaluating mutual funds, ETFs, and individual stocks.
This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.
Net Asset Value represents the per-unit value of a fund’s total assets minus liabilities. Share price refers to the market-determined price of an individual company’s stock, which fluctuates based on demand, supply, and market sentiment.
NAV is not the same as share price. NAV applies to pooled investment vehicles such as mutual funds and ETFs, while share price applies to individual listed companies and changes continuously during market trading hours.
Share price is driven by market forces such as investor sentiment, company performance, and external events. NAV reflects the underlying value of a fund’s assets and liabilities, calculated periodically rather than through continuous market trading.
NAV is not applicable to individual stocks. It is used for pooled investment products like mutual funds and ETFs, where multiple securities are held together and valued collectively on a per-unit basis.
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Posted on 19 Dec
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