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Tipping point: Should you know portfolio turnover ratio before investing?

Many investors think a high turnover ratio means the fund manager is very proactive in managing it

Business Standard 

The portfolio turnover ratio indicates how much buying and selling a fund manager does. A turnover of 100 per cent means the fund manager has changed his entire portfolio once in a year. A turnover of 50 per cent means he has changed half his portfolio in a year, and so on. Many investors think a high turnover ratio means the fund manager is very proactive in managing it.

This is a mistaken belief. Too much churn raises costs. If one is looking for a stable fund, go with one where the turnover ratio is below the median level (see table). A lower turnover ratio means a buy-and-hold kind ...

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First Published: Thu, February 06 2020. 00:42 IST
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