What is portfolio turnover?

Portfolio turnover measures how much of a portfolio is replaced through buying and selling over a period, usually a year. A turnover of 100% means that, in effect, the whole portfolio was exchanged once; 10% means that a tenth of it was. It is a measure of trading activity — and, indirectly, of the costs and taxes that trading causes.

The formula

The standard definition, used for funds, takes the smaller of total purchases and total sales, so that money flowing in or out is not counted as trading:

\text{Turnover} = \frac{\min(\text{Purchases}, \, \text{Sales})}{\text{Average portfolio value}}

For a private portfolio with regular savings, purchases are usually larger than sales, and it is the sales side that shows how much was actively replaced.

A simple illustration

A portfolio worth €80,000 on average over a year sees €30,000 of purchases — €10,000 of them from new savings — and €20,000 of sales:

\text{Turnover} = \frac{\min(30{,}000, \, 20{,}000)}{80{,}000} = 25\%

A quarter of the portfolio was exchanged during the year. At a round-trip cost of 0.5%, that turnover costs about 0.125% of the portfolio's value — small. At a turnover of 200%, the same trading would cost about 1% a year.

How to read it

Turnover	Typical of
under 10%	buy-and-hold portfolios, broad index funds
20–50%	moderately active or regularly rebalanced portfolios
over 100%	active trading

Costs grow with turnover. Every trade pays fees and the bid-ask spread, and outside tax-sheltered accounts, selling at a profit can trigger tax.
Research on private investors has found that those who trade the most tend to earn the lowest net returns, largely because of costs and poorly timed trades.
Some turnover is healthy. Rebalancing and replacing investments for good reasons create turnover too; the question is whether each trade is worth its cost.

Turnover inside funds

Funds report their own turnover. An index fund tracking a broad market typically has very low turnover, because it only trades when the index changes. Active funds often have much higher turnover, and those costs are paid inside the fund, on top of its TER — one reason why the tracking difference is a better measure of a fund's full cost than the TER alone.

A worked example

Worked through on a sample portfolio. The figures below are that portfolio’s, not yours.

How much turnover does my portfolio have?

Here’s your portfolio turnover summary since 2021-05-12.

Metric	Count	Value (EUR)
Total transactions	24
Buys	20
Sells	2
Deposits	2
Withdrawals	0
Inflow value (ex dividends)		92.426,37 €
Outflow value		9.511,00 €
Dividends received (count)	0	0,00 €
Fees paid		0,00 €

If by "turnover" you mean total traded cash, the portfolio shows 92.426,37 € of inflows and 9.511,00 € of outflows over the period above.

See these numbers for your own portfolio

Floreo works out every figure on this page from your own holdings — returns, risk, allocation, currencies — and the assistant explains them the way this page does. Import from your broker, or try it on the sample portfolio first.

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