NAV Calculation and Fund Accounting

Every mutual fund prints exactly one price a day: its net asset value, or NAV. That single number is what you pay to buy in and what you receive to cash out, and it is computed the same way every fund does it — add up everything the fund owns, subtract what it owes, and divide by the number of shares outstanding.

What goes into the number

Component	Examples
Assets	Market value of all securities held, plus cash, plus any accrued but unpaid income (dividends receivable, interest receivable)
Liabilities	Management fees accrued but not yet paid, any amounts owed for securities recently purchased, other payables
Shares outstanding	Total fund shares held by all investors combined

Worked example

A mutual fund holds a portfolio of stocks worth $98 million at today's closing prices, plus $3 million in cash, plus $500,000 of dividends declared but not yet received. It owes $300,000 in accrued management fees and $200,000 for a trade settling tomorrow. The fund has 10 million shares outstanding.

1. Total assets: $98{,}000{,}000 + 3{,}000{,}000 + 500{,}000 = 101{,}500{,}000$.
2. Total liabilities: $300{,}000 + 200{,}000 = 500{,}000$.
3. Net assets: $101{,}500{,}000 - 500{,}000 = 101{,}000{,}000$.
4. NAV per share: $101{,}000{,}000 / 10{,}000{,}000 = 10.10$, i.e. $10.10.

An investor buying $10,100 of the fund today receives exactly 1,000 shares at that $10.10 NAV.

When NAV is struck

For a traditional mutual fund, this calculation happens exactly once per business day, after US markets close (typically 4:00pm Eastern), using that day's closing prices for every holding. All buy and sell orders received before the market close that day are filled at the NAV computed after the close — nobody, retail or institutional, gets to trade at an intraday price. This is called forward pricing, and it exists specifically to stop investors from trading on stale prices.

Why fund accounting matters

Getting NAV wrong is not a rounding issue — every investor buying or selling that day trades at the mispriced NAV, which can transfer real value between entering, exiting and remaining shareholders. Fund administrators independently verify pricing of every holding, reconcile cash, and confirm the NAV before it is published, precisely because an error affects real money moving in and out of the fund that day.