Calculating net asset value (NAV) determines the value of a fund’s assets minus its liabilities. For instance, a mutual fund’s NAV reflects the value of its total holdings (stocks, bonds, etc.) minus expenses, divided by its outstanding shares.
NAV is crucial for investors to gauge a fund’s worth and make informed decisions. It helps assess performance, compare funds, and monitor investment strategies. Historically, NAV calculation gained prominence in the 1940s with the advent of mutual funds.