how etf nav calculated

To determine an ETF's NAV, the total market value of its underlying assets is calculated, adjusted for fees and expenses, and divided by the number of shares outstanding.

Oct 18, 2024 at 09:35 am

How is ETF NAV Calculated?

1. Calculate the Market Value of the Underlying Assets:

   • Determine the market value of each security in the ETF's portfolio based on real-time market prices or closing prices from the previous day.

2. Sum the Market Values:

   • Add up the market values of all the underlying securities to arrive at the total market value of the ETF portfolio.

3. Deduct Fees and Expenses:

   • Subtract any management fees, administrative expenses, and operational costs incurred by the ETF from the total market value.

4. Divide by Number of Shares Outstanding:

   • Divide the adjusted market value by the number of ETF shares outstanding. This gives you the Net Asset Value (NAV) per share.

Example:

Consider an ETF with 1 million shares outstanding that invests in the following underlying assets:

• Apple (AAPL): 25% of portfolio, market value as of close = $25 million
• Microsoft (MSFT): 30% of portfolio, market value as of close = $30 million
• Amazon (AMZN): 20% of portfolio, market value as of close = $20 million
• Tesla (TSLA): 15% of portfolio, market value as of close = $15 million
• Google (GOOGL): 10% of portfolio, market value as of close = $10 million

Calculation:

1. Total Market Value: $25 million + $30 million + $20 million + $15 million + $10 million = $100 million
2. Deduct Fees and Expenses: Assume $1 million in fees and expenses
3. Net Market Value: $100 million - $1 million = $99 million
4. NAV per Share: $99 million ÷ 1 million shares = $99

Therefore, the ETF's NAV per share would be $99.