Why Is Portfolio Turnover Important

Portfolio turnover is a measure of how quickly securities in a fund are either bought or sold by the fund’s managers, over a given period of time. The rate of turnover is important for potential investors to consider, as funds that have a high rate will also have higher fees to reflect the turnover costs.

What is a good portfolio turnover?

Generally speaking, a portfolio turnover ratio is considered low when the ratio is 30% or lower. When the turnover ratio is low, it indicates that the fund manager is following a buy-and-hold investment strategy. Funds with a low turnover ratio are called passively managed funds.

How do you interpret portfolio turnover ratio?

Portfolio Turnover Ratio indicates the frequency with which the fund’s holdings have changed over the past one year. In other words, you may perceive it as turning over of asset under management. It is expressed in percentage terms.