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Related to Turnover ratio: Fixed asset turnover ratio, Receivables turnover ratio, Asset Turnover Ratio
A mutual fund's turnover ratio measures the percentage of holdings that the fund sells, or turns over, in a year.
For example, if a stock fund manager has a portfolio of 100 stocks at the beginning of the year, sells 75 of them and buys 75 different stocks, the turnover rate of the fund is 75%.
Some investors look for funds with lower turnover ratios, since limited trading may help to minimize capital gains taxes and trading costs. However, a high turnover ratio can also produce strong returns, which can offset the added costs and produce a net gain.