portfolio turnover

The lower of purchases or sales of a fund divided by average net assets. Portfolio turnover reflects how frequently securities are bought and sold by the fund. For purposes of determining the turnover rate for stock funds, fixed-income securities with a maturity of less than a year are excluded, as are all government securities. For bond funds, however, long-term U.S. government bonds are included. Mutual funds with high turnover rates generally have higher capital gains distributions—a potential tax liability. Small-cap growth stock funds are most likely to have high turnover rates. Some bond funds may also have very high portfolio turnover rates. A 100% portfolio turnover rate indicates that the value of the portfolio was completely turned over in a year; a 200% portfolio turnover indicates that the value of the portfolio was completely turned over twice in a year. The portfolio turnover rate for the average mutual fund is around 100% but varies with market conditions and investment category.