Sunday, December 26, 2010

Portfolio Turnover

Portfolio turnover is a measure of the amount of trading activity going on in an investment portfolio. A high portfolio turnover ratio means that there has been a lot of buying and selling during the year. Essentially it refers to how many times the portfolio has been 'turned over' and is calculated by calculating the total amount of asset sales by the average amount of assets under management. Funds with a high turnover ratio will generally face higher trading costs, but the style and objectives of the fund will determine how high turnover is e.g. a quantitative trading fund will likely see large volumes of trading, while a long-term value fund will likely hold their positions for years.

Synonyms: Turnover ratio, Portfolio turnover ratio, Trading frequency

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