![]() ![]() Most Equity schemes disclose their Portfolio Turnover Ratio as part of the Fund Fact Sheet every month, though, as per Securities and Exchange Board of India (SEBI) norms, they are required to disclose it twice a year only. Funds with a Value investing objective have a low turnover ratio compared to a fund with Growth investing objective.Smaller or new funds tend to have a higher turnover ratio.Portfolio Turnover Ratio is more significant for funds that have equity exposure.Index funds tend to have a low turnover ratio.The index fund is a sensible, serviceable method for obtaining the market’s rate of return with absolutely no effort and minimal expense. Many people will find the guarantee of playing the stock-market game at par every round a very attractive one. Like all other parameters, Portfolio Turnover Ratio cannot be used in isolation and should be used in conjunction with other risk and return measures.Įxperience conclusively shows that index-fund buyers are likely to obtain results exceeding those of the typical fund manager, whose large advisory fees and substantial portfolio turnover tend to reduce investment yields. Portfolio Turnover Ratio can be used as a qualitative measure for comparing similar funds or two funds from the same category and thus in assessing the Fund Manager’s overall strategy. It is important to observe Portfolio Turnover Ratio during bearish or flat conditions as during a rising market, even very high turnover ratio would yield good results. However, for a passive investor, who likes to sit tight and invest for the long term, index funds would be an ideal choice. However, if the turnover ratio is rising (and hence the expense ratio) but the performance is consistently going down, then the investor should monitor it closely and take action.įor an aggressive investor, active investing and consequent high turnover ratio might look like a good idea. It is considered to be good if it can generate high returns. In a volatile market, though, s/he might consider it prudent to sit back and wait it out.Ī high Portfolio Turnover Ratio results in a higher expense ratio. In an up-trending market, the Fund Manager would try to trade more owing to the available opportunities. It might also indicate a shift in the strategy of the fund. ![]() Sometimes, a sudden change in the Portfolio Turnover Ratio means a change in the Fund Manager, who would follow his own agenda. High Portfolio Turnover Ratio (100% and more) indicates aggressive trading and will add to the costs. It also signifies the conviction of the Fund Manager in his selection of stocks. A low turnover ratio (10-30%) would indicate a buy and hold strategy. Higher trading would mean higher costs and in turn, lower returns.Ī Fund manager’s strategy can be gauged by looking at the Portfolio Turnover Ratio. Thus, although the trading is carried out by the Fund Manager for the Mutual Fund, the cost is borne by the investor. The Portfolio Turnover Ratio of the fund is thus 25%, signifying a churning over of one-fourth of the assets of Fund ABC.Įvery purchase and sale transaction in the stock market involves a cost. The average AUM for the Fund for the year stood at 6000 crores. Portfolio Turnover Ratio = (Lower of total securities purchased or sold) / (Average AUM)įor example – Equity Mutual Fund ABC purchased shares worth INR 1500 crores and sold shares worth 2000 crores in 2018. On Kuvera, you can find the Portfolio Turnover for equity funds in the fund’s details page on the “Other” tab for e.g ICICI Prudential Smallcap Growth Direct Plan In other words, it is the frequency with which the portfolio is churned over. Mutual Fund Portfolio Turnover Ratio is a measure that denotes the percentage of equity Mutual Fund’s holdings which have been replaced during the last year. Mutual Funds Portfolio Turnover Ratio Explained ![]() Mutual Funds Portfolio Turnover Ratio Explained. ![]()
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