What is portfolio turnover ratio?
The portfolio turnover ratio is the percentage of investments a fund manager replaces in a mutual fund scheme over a year. A low turnover ratio means that the fund manager follows a 'buy and hold' strategy, with a commitment to the long term. A high turnover ratio need not necessarily be frowned upon, as it might be due to a fund manager's preference for taking profits periodically on her investments. However, a high turnover ratio, along with poor returns, should be a good reason for rechecking if the scheme is worth it. This situation would usually mean that the fund manager is not sure about her investment strategy. Investors can find the turnover ratio in mutual fund's monthly factsheets.