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Portfolio turnover

Portfolio turnover measures what percentage of a portfolio's assets are bought and sold in a given year.

Expanded Definition

Portfolio turnover indicates how often a fund manager buys and sells assets within a mutual fund, and thus how long the average asset is held within the fund.

For example, a fund with 100% turnover holds stocks for an average of one year. A fund with a 20% turnover holds stocks for an average of five years. A fund with a 200% turnover, on the other hand, holds its stocks for an average of six months.

Turnover matters because buying and selling stocks generate transaction costs that affect the overall returns, but are not represented in the fund's operating expense ratio.

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