A Closer Look at an ETF's Net Asset Value

For instance, an ETF that tracks developing countries will follow markets across a number of time zones, many of which are not open during normal U.S. hours. Consequently, the “fair” price is whatever the market determines it to be.

“The only thing you know for certain is what the prices were when all those markets were last open,” Nadig said. “But you’re not buying at NAV; you’re buying at a market price.”

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Consequently, an ETF’s price will show greater discrepancies in their premiums or discounts to NAV. Behind the scenes, Authorized Participants who create and redeem ETF shares will have to wait until those markets reopen to create new shares of an international ETF to bring the price back in line to the NAV.

“For investors, this means one thing primarily: ignore premiums and discounts (the difference between closing prices and NAVs) as displayed pretty much anywhere for international ETFs,” Nadig added.

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