Understanding the Price of Your ASX ETF: NAV vs. Market Price

Exchange Traded Funds (ETFs) have become increasingly popular among investors on the Australian Securities Exchange (ASX) for their flexibility and diversification benefits. However, understanding how ETF prices are determined can be confusing for newcomers.

Unlike buying an individual stock on the ASX, where the price you see is the price you pay, ETFs introduce the concept of Net Asset Value (NAV) and market price.

Let’s break down these factors in this education series and how they impact your experience as an ETF investor.

Net Asset Value (NAV): The ETF’s Underlying Worth

Imagine an ETF as a basket filled with various stocks, bonds, or commodities. The NAV represents the total value of all these holdings. To calculate the NAV, the value of each security in the basket is considered based on its closing price on the previous trading day.

Essentially, it’s a snapshot of the ETF’s worth if you were to sell all its underlying assets at that specific time.

NAV is also used for calculating ETF performance metrics like NAV return and tracking error.

Why NAV Matters

Think of NAV as a gauge of the ETF’s intrinsic value. It reflects the combined worth of everything the ETF holds. Knowing the NAV can help you assess if the current market price of the ETF is fairly priced.

For instance, if an ETF’s NAV is $10 per share and the market price is also $10, it suggests the ETF is trading close to its true value. However, if the market price is significantly higher than the NAV, it might indicate the ETF is overvalued due to high investor demand.

Market Price: The Price You Pay

Unlike with unlisted actively managed funds where you purchase units directly at the NAV, ETFs trade throughout the day on stock exchanges just like individual stocks. This means the price you pay for an ETF share will fluctuate based on supply and demand in the market.

The Disconnect Between NAV and Market Price

So, why don’t ETF investors buy and sell at NAV?

When there’s high buying pressure for an ETF, the market price can rise above the NAV. Conversely, if there are more sellers than buyers, the price may dip below the NAV. This difference between NAV and market price is temporary and usually evens out throughout the day.

The market price fluctuates continuously throughout the trading day, reflecting real-time supply and demand dynamics.

The market price may not always accurately reflect the ETF’s underlying value, especially during times of market volatility or liquidity constraints.

The role of arbitrage

Arbitrage also helps to keep the market price close to NAV. This can understand why deviations between NAV and market price are typically short-lived.

Imagine you have two stores in the same neighborhood selling identical items: Store A sells apples for $2 each, while Store B sells them for $1.50 each. What would you do? You’d likely buy apples from Store B and sell them at Store A for a profit, right? This is essentially what arbitrage is all about – taking advantage of price differences in different markets to make a profit.

Key Takeaways for New ETF Investors

  • NAV provides a good indicator of an ETF’s intrinsic value.
  • The market price you pay for an ETF share can differ from the NAV due to supply and demand.
  • While NAV is a helpful metric, your buying and selling decisions should be based on a comprehensive investment strategy that considers factors like your risk tolerance and investment goals.

By understanding the interplay between NAV and market price, you’ll be better equipped to navigate the world of ETF investing.

Remember, conducting your research is crucial before making any investment decisions.

Stay informed about market trends and ETF performance by utilizing financial news sources such as www.juststocks.com.au and analytical tools on our website.


Understanding the interplay between Net Asset Value (NAV) and market price helps navigate the dynamic landscape of ETF investing.

While NAV provides insight into an ETF’s intrinsic value, market price reflects real-time supply and demand dynamics.

Remember, successful investing involves considering a range of factors beyond NAV and market price, such as expense ratios, liquidity, and tracking error.

Stay informed about market trends and ETF performance to make well-informed decisions. Whether you’re a newbie novice or a seasoned investor, continued learning and exploration are key to unlocking the full potential of ETFs.

Stay up to date with our ETF Education and ETF news.



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