Two prices, two different jobs
An exchange-traded fund has a market price: the price at which buyers and sellers are trading its shares on an exchange. It also has a net asset value, or NAV: a measure of the value of the fund’s assets minus liabilities, expressed per share.
These figures are related, but they are not identical by definition. The market price changes during trading as orders meet. The fund calculates NAV on a schedule set by its rules; the SEC notes that ETFs in its bulletin calculate NAV per share every business day. So a live market quote and a published NAV may describe different moments.
Premium and discount in plain English
If an ETF share trades above its NAV per share, it is trading at a premium. If it trades below NAV, it is at a discount. For a simple example, imagine a fund’s most recent NAV is S$10.00 and its current exchange price is S$10.10. Relative to that NAV, the share is 1% higher. At S$9.90, it is 1% lower.
That calculation is a comparison, not an automatic signal to buy or sell. The NAV may be from an earlier valuation point, the underlying assets may be less liquid, or market demand may have shifted. The gap can change. A premium can narrow or widen, and a discount can persist; it does not promise a future return.
ETF structures typically include a creation-and-redemption process involving large financial institutions. Their activity can help keep market prices near the value of the portfolio, but does not force an exact match at every moment. Retail investors generally trade ETF shares with other market participants at market prices rather than redeeming individual shares directly with the fund.
The bid–ask spread is separate
Even if the price is close to NAV, the exchange quote has a bid and an ask. The bid is what buyers are currently offering; the ask is what sellers are currently requesting. The difference is the bid–ask spread. If you buy at the ask and immediately sell at the bid, that spread is an immediate trading cost, before commissions or other charges.
A fund with a familiar name can still have a wide spread at a particular time. Trading activity, market conditions and the liquidity of the underlying assets can matter. Avoid treating a single displayed last-traded price as proof that a large order can be completed at the same level.
A practical checklist
Before buying an ETF, look up the fund’s stated NAV and how it is calculated, the current bid and ask, the premium or discount information published by the provider, and the time of the latest valuation. If the underlying market is closed while the ETF continues trading elsewhere, the quoted price can respond to new information before the next official NAV is calculated. For overseas funds, also check the currency and exchange on which the share is listed.
The market price is what a buyer and seller can trade at now; NAV is a valuation reference for the fund’s holdings. Looking at both is more informative than treating either number as the “true” share price on its own.
Sources
- U.S. SEC Investor.gov: Updated Investor Bulletin on ETFs — published 23 Feb 2023; verified 5 Oct 2026.