NAV Discounts and Premiums · Investment Trusts

A discount or premium compares the share price with NAV per share. The calculation is simple, but the choice of denominator and valuation date changes what the result means.

Put NAV in the denominator

Discount percentage equals NAV minus share price, divided by NAV, multiplied by 100. If NAV is 320p and price is 272p, the difference is 48p. Dividing 48 by 320 gives a 15% discount.

For a premium, subtract NAV from price and divide by NAV. A 336p price against 320p NAV represents a 5% premium. Some data services show discounts as negative numbers. Check the sign convention before comparing observations.

Do not confuse discount with upside

A 15% discount does not mean that a move back to unchanged NAV produces a 15% share price gain. The investor paid 272p. A rise of 48p from that purchase price would be about 17.65%, before costs and distributions. The gain uses price as its denominator.

That is a hypothetical scenario, not an expected return. NAV could fall, the discount could persist or the price could move further away. Calculating a gap does not explain whether it will close.

Keep the inputs compatible

Use the same share class, currency and relevant valuation basis. A private asset valuation and a current market quote can refer to different economic conditions. A precise spreadsheet output cannot repair uncertain inputs.

Store price, NAV, date and methodology alongside the percentage. When comparing several companies, the calculation becomes useful only after those inputs are aligned.

Try it yourself

NAV is 500p and price is 425p. What is the discount, and what would a rise to unchanged NAV mean for the purchase price?

Show the worked answer

The discount is 15%. A 75p gain on 425p is about 17.65%. Neither calculation predicts that the price will reach NAV.

Further reading

Educational material, not a recommendation to buy or sell a fund. Numerical examples are hypothetical. This guide focuses on listed investment companies commonly called investment trusts in the UK. Product terms, access and tax treatment vary by jurisdiction.

Continue learning