Turnover Ratio

This ratio shows the amount of times each year that the fund's holdings are turned over. In the event that a fund has $100 million in assets and sells stocks accounting for $40 million, the turnover ratio is 40%. High turnover frequently, however not generally, prompts big tax bills.

Highlights

• The turnover ratio or turnover rate is the percentage of a mutual fund or other portfolio's holdings that have been supplanted in a given year.
• Funds with high turnover ratios could cause greater costs (trading fees, commissions) and generate short-term capital gains, which are taxable at a financial backer's ordinary-income rate.
• The turnover ratio changes by the type of mutual fund, its investment objective, and additionally the portfolio administrator's investing style.