Turnover

Turnover refers to the length of time the average stock stays in a portfolio or mutual fund.

Turnover also refers to the amount of time inventory remains in stock before being sold.

In the United Kingdom, turnover refers to a company's total sales for a given period of time.

Expanded Definition

In investing, turnover measures how long, on average, a portfolio or mutual fund will hold a stock. A high turnover indicates that stocks are being bought and sold rapidly; a low turnover indicates that stocks are, on average, being held for longer periods of time.

Turnover matters to investors because every purchase or sale of a stock, whether in an individual portfolio or a mutual fund, incurs fees and because capital gains taxes are higher for investments held for less than one year. High turnover, also known as churn, creates higher transaction costs, which lower an investor's overall returns. Investors are often therefore advised to pay attention to the turnover rates of mutual funds in which they invest.

Because financial advisors often earn commissions when they buy or sell a stock in a client's portfolio, turnover can represent a conflict of interest between the client and the advisor.

When it refers to a company's inventory, turnover measures how quickly products are moving from manufacture to sale. High turnover suggests a strong demand for the product, while low turnover suggests sluggish demand.

Related Fool Articles

• Turnover and Cash Reserves
• Pay Attention to Turnover
• Tips for Tracking Turnover

Related Terms

• Asset turnover
• Portfolio turnover
• Mutual fund
• Sales
• Revenue

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