Exchange-traded funds (ETFs) have become a popular way to invest. But when it comes to how they’re priced, things can get a little confusing.

You might see one number listed on the market , and another mentioned in the fund’s documentation. Both seem important, but they’re not always the same. So, what’s going on behind the scenes? And does the way an ETF is priced actually affect how you invest?

In this article, we’ll explain how ETF pricing works, where the numbers come from, and how it compares to other types of investments. There’s no right or wrong way to respond to pricing differences. But knowing how it works can help you feel more informed and less surprised along your investing journey. Let’s take a closer look.

What’s the price of an ETF?

An ETF has multiple prices, each serving a different purpose. Here’s a breakdown of the key ones:

Market price

This is the price you see on the Australian Securities Exchange (ASX) during trading hours. It changes throughout the day based on supply and demand. In other words, it reflects what investors are willing to pay or accept for one unit at any moment.

Net asset value (NAV)

The NAV is the total value of the ETF’s assets, divided by the number of units on issue. It’s usually calculated once a day, after markets close. It reflects the value of the underlying investments, not what buyers and sellers are doing on the market.

Indicative NAV (iNAV)

Some ETF providers publish an iNAV during the trading day. It’s an estimate of the ETF’s value in real time, based on live data. While not exact, it helps give a sense of whether the current market price is close to the value of the assets inside.

The market price and NAV are usually similar, but not always the same. That’s because the market price updates instantly, while the NAV only updates at the end of the day.

Why ETF prices usually stay close to their value

As we’ve said, the market price of an ETF listed on the ASX can move throughout the day. But it usually stays close to the ETF’s NAV. That’s not by accident.

There’s a built-in system that helps keep things in line. It relies on large institutions — often called market makers or authorised participants — who can create or cancel ETF units as needed.

Here’s how it works:

• If the ETF is trading above its NAV, a trader can buy the fund’s underlying assets for less and sell the ETF for more.
• If the ETF is trading below its NAV, they can buy the ETF at a discount, redeem it for the underlying assets, and make a profit.

This process is called arbitrage . It might sound complex, but it simply means taking advantage of price differences between the ETF and its assets. When traders do this, it helps pull the market price back toward the NAV.

This pricing feature is unique to ETFs . Managed funds, for example, don’t trade on an exchange. They don’t allow intraday trading, so this type of price adjustment doesn’t happen.

By keeping ETF prices aligned with the value of what they hold, the system helps create more transparency for investors.

When does ETF pricing matter most?

ETF pricing usually works efficiently, especially for widely traded funds. But there are times when price differences can become more noticeable. Here’s when that’s more likely to happen.

During market volatility

When markets move quickly, ETF prices can swing with them. But the NAV is typically updated only once a day. This means the market price might move ahead of the NAV, creating a temporary mismatch.

These gaps usually close over time, but during sudden market shifts, short-term differences can stand out more than usual.

At the open and close of trading days

Price spreads often widen just after the market opens or before it closes. This happens when there’s uncertainty about the value of the ETF’s assets.

If you're buying or selling during these times, the final price may land slightly above or below the NAV or indicative NAV.

For ETFs with low trading volume

Some ETFs don’t trade as frequently. This can happen even if the ETFs track indexes that are large and well known. Fewer trades can mean less competitive pricing, which increases the chance of buying or selling away from the NAV.

How ETF pricing compares to other investment pricing models

Not all investments are priced the same way. Some update in real time, others once a day. Here’s how ETFs compare with other common investment types and what that might mean for you as an investor.

Direct shares

• Shares trade directly on the stock exchange during market hours.
• Their price is based purely on supply and demand — what buyers are willing to pay and sellers are willing to accept.
• Prices can change rapidly depending on company news, broader market shifts, or economic updates.
• There’s no NAV to consider. The listed price is the value the market agrees on at that moment.
• Investors can place market or limit orders to control how and when they buy or sell.

Managed funds

• Managed funds are unlisted, so you can’t trade them on the stock exchange.
• When you buy or sell units, the price is calculated later, usually at the end of the trading day.
• The price is based on the fund’s NAV, which reflects the value of the fund’s assets.
• This pricing model doesn’t allow intraday trading. You won't know the final unit price until after the transaction is processed.
• It can work well for investors focused on long-term goals rather than short-term price movements.

Listed investment companies (LICs)

• LICs are publicly listed companies that invest in a portfolio of assets and trade like regular shares.
• The number of shares on issue is fixed, unlike ETFs, where new units can be created or cancelled.
• Prices are influenced by market sentiment, as well as the value of the underlying assets.
• LICs can trade at a premium (above NAV) or discount (below NAV), depending on investor demand.
• That gap between price and value can persist for long periods and may affect investor returns.

Property trusts or REITs

• Real estate investment trusts (REITs) are listed on the exchange and trade like shares.
• Their market price moves throughout the day based on supply and demand.
• REITs hold property assets , which are less liquid and harder to value in real time.
• Because of this, prices can be more sensitive to sentiment around interest rates, property markets, or economic conditions .
• Like LICs, REITs may trade at a premium or discount to their net asset value.

While ETFs often sit between direct shares and managed funds in how they operate, they also bring unique pricing features, as we covered earlier. Knowing how different models work can help you better assess the mechanics behind each investment type.

How can different pricing approaches affect your strategy?

Investment pricing doesn’t just affect what you pay or receive. It can shape how (and when) you choose to invest. These questions may help you reflect on how pricing fits into your approach, especially if you're investing for the long term.

1. Are you placing market orders or limit orders?

A market order buys or sells straight away at the best available price. It’s quick but offers less control over the outcome. A limit order , in contrast, sets the maximum you're willing to pay or the minimum you’ll accept to sell. It gives more control, but there’s no guarantee it will be filled.

In thinly traded markets or times of volatility, the difference can matter.

2. Do you check the ETF’s NAV or iNAV?

Some investors keep an eye on the NAV or iNAV before placing a trade. Others don’t see the need.

The NAV gives a daily snapshot of what the ETF’s assets are worth. The iNAV updates more frequently throughout the day. Checking these figures can help identify if the market price is far from the underlying value.

3. Do you understand the spread between bid and ask prices?

The bid is what a buyer offers. The ask is what a seller wants. The difference between them is called the spread .

A wider spread can mean paying more to buy, or receiving less when selling. This is more common with low-volume investments.

Being aware of the spread helps you avoid surprises, especially if you're trading larger amounts.

4. Do pricing quirks bother you or do you stick to your plan?

For long-term investors , small pricing differences may tend to even out over time. But that doesn’t mean they should be ignored.

If you're uncomfortable with occasional price gaps or premiums, it may help to consider how much they matter in the context of your broader goals. Reflecting on these pricing features — not just for ETFs, but also for shares, LICs or managed funds — can support a strategy that suits how you invest.

Don’t let price noise drown out long-term goals

ETF pricing has a few moving parts, but understanding them can make investing feel more straightforward, especially when markets seem unpredictable.

As we’ve said, the price you see on screen isn’t all there is. It helps to know what’s behind it.

That doesn’t mean watching every price movement or checking the NAV daily. But knowing how ETF pricing works can give you a sense of control when things shift.

Price is just one part of investing. Long-term outcomes often depend more on consistency, planning and patience than on timing a perfect entry.

So take your time, stay curious, and keep learning to build an approach that reflects your goals.