Net Asset Value (NAV) represents the per-share value of a fund's net assets. It is calculated using the formula: NAV = (Total Assets - Total Liabilities) / Shares Outstanding. For open-end mutual funds, shares are bought and sold at the NAV price calculated at the end of each trading day. This ensures that all investors transact at a fair price reflecting the actual value of the underlying holdings.

For exchange-traded funds (ETFs) and closed-end funds that trade on stock exchanges, the market price can differ from the NAV. When the market price exceeds NAV, the fund trades at a premium, and when it falls below NAV, it trades at a discount. ETFs typically trade very close to NAV due to an arbitrage mechanism involving authorized participants, while closed-end funds can sustain significant premiums or discounts for extended periods.

Investors in closed-end funds often look for opportunities to buy at a discount to NAV, as this means they are acquiring the underlying assets for less than their intrinsic value. However, a persistent discount may signal underlying issues with the fund's management, strategy, or asset quality. Understanding NAV and its relationship to market price is essential for anyone investing in pooled investment vehicles.