What is portfolio turnover

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Email id — investor. Email id — partner. Skip to Main Content. Close Menu. Our Products. Customer Support. Download our App. Cancel Search. What the portfolio turnover ratio means to investors? Investors may have to pay taxes on those capital gains.

Certain types of mutual funds generally have higher turnover rates. Growth funds and funds with more aggressive strategies have higher turnovers. More value-oriented funds tend to have lower turnover.

If the turnover rate is high, while the performance is lagging, an investor may be better off looking for alternatives.

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Chances might be that the fund manager is clueless about the market movements. And he is just churning the portfolio as a hit and trial method to arrive at the ideal stock picking.

In such a scenario, you might end up paying higher fund management expenses without getting corresponding higher returns.

Hence, it is very important to consider other ratios like Sharpe ratio to derive true sense out of Portfolio Turnover Ratio. Apart from this, you need to align your investment objectives with that of the fund.

If you believe in passive investing, then active investing might seem a costly proposition. Thus, based on Portfolio Turnover Ratio and objective, select an appropriate mutual fund.

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