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Portfolio Turnover in Mutual Funds is an important indicator as to how active (or hyper-active or inactive) the scheme in which you invested is.
Too low or too high of Portfolio Turnover is not a good sign.
First, let us see how the Portfolio Turnover is calculated.
AMFI has given us a simple formula.
The Portfolio Turnover of a scheme is the lower of purchases and sales on each day and divided by average net assets.
When this number is more, it means the scheme traded more.
Any we know, the more the trading, the more the fund has to incur expenses in the form of trading expenses.
This has two possibilities...
The fund manager has made wrong investment calls and is doing the correction..
or he is chasing market momentum and churning stocks to the changing market circumstances a bit more quickly than usual