ETF NAV vs Market Price: Understanding Premiums and Discounts

What is an ETF’s Net Asset Value (NAV)?

  1. An Exchange-Traded Fund (ETF) has a Net Asset Value (NAV), which represents the total value of its assets minus liabilities, divided by the number of outstanding units. 

  2. NAV is calculated at the end of each trading day and helps investors understand the intrinsic value of the ETF.

  3. However, unlike mutual funds, ETFs trade on stock exchanges at market prices, which may differ from their NAV due to supply and demand. 

  4. This creates a premium or discount scenario where the ETF's market price is higher or lower than its NAV.

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