Portfolio Turnover Ratio
The proportion of a fund's portfolio replaced over a year, measuring how actively it trades.
Formula
Portfolio Turnover = Lesser of Total Purchases or Total Sales / Average Assets Under Management x 100
Unit
%
In depth
Turnover translates directly into cost: every trade pays brokerage, securities transaction tax, spread and impact, and none of that appears in the expense ratio. A ratio of 100% means the whole portfolio was replaced once, implying an average holding period of about a year. High turnover is not automatically bad — some strategies require it — but it must be justified by returns that exceed the cost it generates. Comparing two funds with similar returns and very different turnover tells you which one is taking more risk of cost drag.
Worked example
A fund with 120% turnover replaces its portfolio in about ten months. At a round-trip cost of 0.4%, that is 120% x 0.4% = 0.48% a year in costs invisible in the expense ratio.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Portfolio Turnover Ratio” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.