What is the turnover ratio?

The turnover ratio is the process of measurement, how many times they are sold over a period of time. Generally, the turnover ratio is calculated to cover either the calendar year or a period including twelve consecutive calendar months. The same formula can be used to evaluate shorter or longer times.

The turnover ratio is usually associated with the activity of the mutual fund. The main idea is to find out the percentage of assets that are sold or passed during the quoted period. Although any group of mutual funds is expected a certain amount of turnover, investors generally seek means that experience a relatively low percentage of turnover.

The easiest way to understand the turnover ratio is the evaluation of sales activity during the calendar year. On 1 January of the given year, the share fund has an inventory of 200 shares. During the year, 150 of these shares are sold and 150 Different Stocks are purchased. At the end of the year, the fund still contains the same number of stocks and appears to be on the surfacepredatory. However, the turnover ratio per year is 75%.

When the turnover ratio for a mutual fund is somewhat high, investors will explore well to explore the reasons why the turnover was not lower. Often there are legitimate reasons why the sales activity in the fund was higher than an acceptable level. This may include changes in the economy or in political situations that had a negative impact on stocks that were eventually sold. It is therefore not right to assume that the high turnover ratio automatically means that the fund is unstable or is not properly managed.

As with many indicators, the turnover ratio is used as a reference point for the investor. The ratio of turnover, which is considered to be reasonable, indicates investments, which is stable and is worth considering. At the same time, a mutual fund should be closely examined before the investment, which carries a high turnover ratio for several consecutive periods. Even whenThe reasons for the high sales activity may be harmless, an unusual amount of turnover may also indicate the presence of factors that would negatively affect the investor.