Turnover Ratio

Turnover Ratio is a rate showing the percentage of a fund’s holdings that have been sold over the previous four quarters, as of the most recent quarter end. For example if a fund holds 100 securities and sells 25 securities over the last 4 quarters, the fund will have a turnover ratio of 25%. Although the turnover ratio is expressed as a percentage, funds can have a turnover ratio greater than 100% if the fund has sold more securities in the past four quarters than the total number held by the fund.

Due to the cost of buying and selling securities, a high turnover ratio can result in higher expenses for the fund. Higher turnover may also lead to an increase in capital gains, which can have tax consequences for investors. Since turnover ratios may differ greatly depending on the fund strategy, it is typically most useful when comparing funds across similar categories. For example, active funds will often have a higher turnover ratio than passive funds

Turnover Ratio = number of holdings sold over the past 4 quarters / total number of holdings