Portfolio turnover rate

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Portfolio turnover rate

For an investment company, an annualized rate found by dividing the lesser of purchases and sales by the average of portfolio assets.

Portfolio Turnover Rate

The ratio at which a portfolio trades the securities in it. A higher turnover rate indicates active management; if it becomes very high, this may indicate that the broker or manager is trading securities for the sake of collecting more fees. It is calculated as the trading volume of the portfolio as a percentage of the entire portfolio. See also: Prudent person rule.
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High portfolio turnover rates could generate capital gains that must be distributed to shareholders as short-term capital gains taxed at ordinary income rates (currently as high as 35%) and could increase brokerage commission costs.
Since the portfolio is regularly rebalanced, this may result in higher portfolio turnover rates, higher expenses and potentially higher net taxable gains or losses compared to a "buy and hold" or index strategy.
The Fund may engage in short-term trading to try to achieve its objective and may have portfolio turnover rates significantly in excess of 100%.
First, Bloomberg screened for above-average five-year performance in each fund category then made two further cuts to eliminate funds whose expenses or portfolio turnover rates were above average.