The value of the stocks and/or bonds owned by a mutual
fund is usually stated in terms of net asset value (NAV). The
number of securities in a fund may range from as few as 30
to as many as 120. As the value of the securities moves up
and down, the NAV (and the purchase price) of your fund
changes accordingly.
Net asset value is expressed as the value of all the securities
(stocks and/or bonds) in the mutual fund portfolio divided
by the number of shares of the mutual fund owned by
investors. The resulting net asset value per share is the price
at which shares in the fund can be bought or sold.
For example, if a mutual fund owned stocks with a total value
of $1 billion dollars and investors owned 100 million shares
of the fund, the net asset value per share would be $1 billion
÷ 100 million = $10. Thus, it would cost an investor $10 to
buy a single share in the fund, and an investor who sold a
share in the fund would receive $10 for it.
Because the values of stocks and bonds change from day to
day, the NAV of any mutual fund also fluctuates on a daily
basis. As the NAV of a fund you own rises, so does the value
of your shares. When you decide to sell those shares, you receive
more money than you paid for them, reflecting the higher value.
(Of course, the NAV of a fund may sometimes fall.)