{"id":6701,"date":"2026-05-25T12:48:00","date_gmt":"2026-05-25T12:48:00","guid":{"rendered":"https:\/\/www.paytmmoney.com\/blog\/?p=6701"},"modified":"2026-05-25T12:48:00","modified_gmt":"2026-05-25T12:48:00","slug":"portfolio-turnover-ratio-mutual-funds-strategy","status":"publish","type":"post","link":"https:\/\/www.paytmmoney.com\/blog\/portfolio-turnover-ratio-mutual-funds-strategy\/","title":{"rendered":"What Portfolio Turnover Says About Your Mutual Fund Strategy"},"content":{"rendered":"

Ever invested in a mutual fund after checking its returns, only to wonder later why the fund suddenly started behaving differently? Maybe the portfolio changed drastically, volatility increased, or the returns became inconsistent. Most investors focus only on returns, expense ratio, or fund size. But there is one important metric quietly revealing how your fund manager actually operates: the portfolio turnover ratio.<\/span><\/p>\n

The portfolio turnover ratio in <\/span>mutual funds<\/span> <\/span><\/a>tells you how frequently a fund manager buys and sells securities within the portfolio over a year. In simple terms, it shows whether your fund manager is patiently holding investments or actively trading them.<\/span><\/p>\n

And surprisingly, this small number can reveal a lot about your mutual fund strategy, costs, tax efficiency, and even long-term suitability for your financial goals. Let us understand portfolio turnover ratio in the simplest way possible.<\/span><\/p>\n

What Is Portfolio Turnover Ratio?<\/b><\/h2>\n

The portfolio turnover ratio reflects the percentage of a <\/span>mutual fund portfolio<\/span><\/span><\/a> that has been replaced during a year.<\/span><\/p>\n

It is calculated using this formula:<\/span><\/p>\n

\n\n\n\n
Lower of total securities bought or sold \u00f7 Average Assets Under Management (AUM) \u00d7 100<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

For example:<\/strong><\/p>\n

\n\n\n\n\n\n\n\n
Particulars<\/th>\nValue<\/th>\n<\/tr>\n<\/thead>\n
Securities Bought<\/td>\n\u20b91,000 crore<\/td>\n<\/tr>\n
Securities Sold<\/td>\n\u20b9800 crore<\/td>\n<\/tr>\n
Average AUM<\/td>\n\u20b91,200 crore<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

Since the lower value between bought and sold securities is considered:<\/span><\/p>\n

Portfolio Turnover Ratio = \u20b9800 crore \u00f7 \u20b91,200 crore \u00d7 100 = 66.67%<\/span><\/p>\n

This means nearly two-thirds of the portfolio holdings changed during the year.<\/span><\/p>\n

A turnover ratio of:<\/strong><\/p>\n