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Finance Glossary

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Turnover Rate

Definition:

The term that securities regulators sometimes use to describe how often trades are happening in an account, compared to the actual average daily value of the account. For example, if Billy Bob's account has an average balance of $10,000 but total combined trades of $70,000 for the year, then his account is trading at a turnover rate of seven and is most likely the victim of churning in his account.

P.S Apples cost extra.

Example

Turnover rates are a big issue in a high tax world: every time you "turn an investment over," you sell it. And when you sell, you realize gains, which means that you pay taxes. If you turn over a portfolio fully, you'll have done it 1x or 100%; turn it over 5x in a year and it's likely that your broker is stealing from ya...taking needless commissions on transactions you didn't need to do.

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