Understanding iNAV: The Inner Value of ETFs

iNAV, or Intraday Net Asset Value, is a crucial concept for understanding the value of Exchange Traded Funds (ETFs) throughout the trading day. Unlike mutual funds, which only calculate their NAV (Net Asset Value) once a day, ETFs trade like stocks, meaning their price fluctuates throughout the day.

Here’s a breakdown of iNAV for ETFs:

  • What it is: An estimate of the fair value of an ETF based on the current market prices of its underlying holdings.
  • How it’s calculated: The exchange listing the ETF calculates the iNAV by considering the real-time prices of the stocks, bonds, or other assets that make up the ETF. This calculation is typically done and disseminated every 15 seconds.
  • Why it’s important: iNAV provides a valuable reference point for investors considering buying or selling an ETF during the trading day. It helps them gauge if the current market price is close to the ETF’s underlying value.

Here are some additional points to consider about iNAV

  • Not a perfect measure: iNAV is an estimate and may not reflect the exact value of the ETF due to factors like stale pricing data for underlying holdings or imperfect liquidity.
  • Limitations: If the ETF and its underlying holdings trade in different time zones, the iNAV might not perfectly reflect the true value.
  • Trading with iNAV: While iNAV is a good reference, you cannot directly buy or sell ETFs based on the iNAV price. The actual purchase price will depend on the current market demand and supply for the ETF shares.

Overall, iNAV is a helpful tool for ETF investors, offering a real-time snapshot of the ETF’s value based on its underlying assets. By understanding iNAV, you can make more informed decisions about your ETF trades throughout the trading day.