Why does the NAV (Net Asset Value) of my mutual fund change when there is a distribution? Can you provide me with an example?
The net asset value (NAV) of a mutual fund represents the mutual fund’s asset less its liabilities. NAV will fluctuate with changes in the market value of the mutual fund’s particular investments.
Typically, the NAV of a mutual fund will fall initially because a pay out of a distribution will lower the assets and cash in the mutual fund. This will be based on a valuation – typically outlined in the prospectus of the mutual fund on the System for Electronic Document Analysis and Retrieval (SEDAR). This does not mean the NAV will be lower indefinitely. There are other factors that affect calculation of NAV. You should review the NAV in the prospectus to understand how it is calculated. Learn more about mutual funds and NAV and where to get information about a prospectus on SEDAR.