An ETF has a market price, but it also has a net asset value derived from its assets and liabilities. The two figures can differ. A price above NAV is described as a premium; a price below NAV is described as a discount.
Investor.gov’s ETF explanation notes that investors trade ETF shares at market prices that may not equal NAV. The distinction matters when interpreting a fund’s published pricing information.
Use a small numerical example
Suppose an entirely fictional fund reports NAV of 100 per share and a corresponding market price of 101. The price is 1% above NAV: (101 minus 100) divided by 100. At a price of 99, it would be 1% below that same NAV.
Before doing this calculation with real data, check the timestamps, currency and methodology. A current trading price compared with an earlier valuation can mix different moments. An indicative intraday figure is also not automatically the same thing as the fund’s official NAV.
Use the fund provider’s explanation of how its premium and discount history is calculated. A screenshot containing two numbers is not enough if their definitions are missing.
Do not turn the label into a verdict
A discount is not, by itself, proof of a bargain, and a premium is not a complete assessment of the investment. The fund’s assets, structure, risks, expenses and suitability still need examination. This article explains a pricing term rather than recommending a trade.
When researching a fund, save its prospectus and the relevant pricing page with the observation date. Ask whether a quoted figure is a single observation or part of a recurring pattern, using comparable data rather than selected examples.
Keep a separate note for anything you cannot explain. Understanding what the market price is being compared with is a necessary first step before deciding what that difference means for an actual investment decision.