What is the annual turnover?
Annual turnover is a term used to describe the degree of change that occurs in the calendar year. Generally presented as a percentage, a turnover describing the change within employees, then holding within the investment portfolio or shifts with investments held by a mutual fund or some type of fund traded on the stock exchange. In each application, the annual turnover ratio and the reasons for the changes that have occurred are invaluable in terms of planning for the future.
In terms of annual turnover of employees, most businesses seek to maintain the ratio as low as possible. When an employee is hired, the employer invests in this employee, most often by training an employee performing tasks that do not have to deal with in the past. Since it costs money to train new employees, the possession of current employees who are fully competent in their positions are in the best interest of the company. Ason often offer incentives to stay in the long term for this responsey in business. As a bonus, maintaining the annual turnover, it also increases the perception that the company is stable and will probably be for many years.
As it concerns investment activities, annual turnover is the ratio or percentage of changes that take place within the investment portfolio during the calendar year. With this application, the higher annual turnover is not necessarily a negative thing if this turnover has actually increased the value and diversity of portfolio. For example, if the investor began a year by a portfolio, which was tremendously composed of stock options associated with a single sector, there would be an obvious need to diversify. Assuming that the investor has taken steps to ensure shares related to other industries during the year, he has purchased several bond problems and reduces his market exhibition in this industry, there is a great chance that the portfolio will bring higher return. At the same time will be a portfoLio placed to protect the investor from a sudden decline in one industry.
Annual turnover is also used to describe the rate of change in the fund or some type of fund traded on the stock exchange in a given year. As with portfolio diversification, mutual fund managers will constantly evaluate new investment opportunities for inclusion in the fund. This may include the sale of investments that do not make up to par, and is not improving the performance for a certain period of time. In the case of this, a higher annual turnover is considered a positive event, because the ways have changed protected by the best interest in the fund and allowed the return rate to be as high as possible.