InvestorQ : What is a reasonable turnover ratio in Mutual fund portfolios?
Riya Dwivedi made post

What is a reasonable turnover ratio in Mutual fund portfolios?

Answer
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Arti Chavan answered.
1 year ago


Portfolio turnover generally represents the percentage of holdings in the portfolio that have changed over a period of time. It is calculated by dividing either the total purchases or total sales, whichever is lower, by the average of the net assets, for a 12 month period.

Example:
If a fund’s net assets total Rs.100, funds purchased are Rs.150 and sell off Rs.100 worth securities in a particular year, it's turnover rate would be 100%. There is no hard and fast rule for a reasonable turnover, but generally, 100% or slightly higher rate is acceptable. While if we talk about the return, there is an average return of 4.67% on mutual funds over the past 20 years. The actual return varies based on funds chosen and time in the fund. However, the average return for a period over the last five years exceeded 6.5%.