Mutual Funds Turnover Ratio

Mutual Funds Turnover Ratio: The measure in percentages of the changes of a mutual fund's assets for a given time period represents its turnover ratio.

The turnover ratio presents the trading activity of a mutual fund usually during one year. Generally, high turnover ratios are an indicator of the high expenses of the fund. Additionally, high turnover can bring with itself high tax levies, whenever the fund is not included in a retirement plan.

Turnover Ratio Calculation

The division of the average assets by the lesser of the value of purchases together with the value of the sales during the specified period gives the turnover ratio of the mutual fund.

For instance John decided not to invest in fund X due to its high turnover ratio, which implied high fund expenses.

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