An annual turnover is what you are supposed to do with your bed mattress to make sure it doesn't become a cheap roadside motel for mites. In finance, it's the amount that an investment firm sees its holdings change-over from one year to another.
Investors put money into a mutual fund or other investment vehicle, which then buys stocks or other investments with that money. The managers of the fund look for opportunities, buying stocks that seem like potential winners and selling stocks that don't seem to have much more upside.
In the fund's annual report, this buying and selling gets boiled down to the annual turnover figure. It is given as a percentage rate and gets computed in relation to the amount of money the fund has under management.
The rate of turnover will depend on the type of fund. Index funds (or funds meant to track a particular group of stocks, like the S&P 500) will have very low turnover. Actively traded funds (where the fund managers are explicitly trying to beat the market with aggressive trading...and good luck with that, as almost nobody ever does, over time) will have very high turnover.
Higher turnover can lead to higher expenses for the fund...lots of commissions paid when you buy and sell stocks, meaning that investment gains have to be that much higher just to overcome the higher costs of trading.
The bigger issue? Taxes. Each time you sell for a gain, you incur a tax on that sale so most tax paying investors (i.e. if they own the fund in their personal account versus an IRA) don’t like high annual turnover in their investments.
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Finance: What are Investment Objective a...3 Views
Finance allah shmoop what are investment objective and style All
right people we all want to make money right Okay
everyone except that guy Yeah That's everyone's overall investment objective
Scratch a little further and you'll find that everyone's investment
goal or objective is a little different Well some people
want to make a lots of money fast and they
can risk a lot you know because retirement is right
around the corner and they've got a prayer on their
side Some people are okay with making money slow because
they don't feel comfortable taking a lot of risk Some
folks want to make money sure but want to invest
only in quote ethical unquote companies And you got a
whole bunch of other flavors on down the line Well
it's a registered investment advisors job to figure out how
much someone wants to make and how they want to
make that money risk wise with their investments Not knowing
this stuff helps the adviser choose the right options for
their client So what's your investment style Sure you've got
style that would make kanye west weak but what's your
investment style like depends on your personality your investment ideas
And what your goals are and how much you really
can risk and you afford tto lose everything and start
all over if things go bust putting all your money
in whatever dot com well your style might be aggressive
like you go after stock to think a ll rise
and rise fast you know like new i pose and
high growth tech companies and you're comfortable knowing they could
also go bust and you could also be an index
or just kind of passive i eat You're not going
to try to outperform the market you're into long term
growth so you might want to just be the market
by an index fund of the s and p five
hundred Your style might be focused on buying shares in
big companies and holding them for a long time or
brian smaller growth e companies and hoping they take off
but holding them for a long time like not a
lot of trading not a lot of taxes things just
kind of plunk along Well you might be all about
value buying stocks everybody hates when they're on the cover
the wall street journal which is saying this thing is
a dog Then you want to buy it because really
cheap or you might be in a growth like companies
that don't pay a dividend Maybe they don't even have
any earnings like amazon Amazon probably the greatest growth stock
in history barely had any earnings no dividend and it
just grows you know look at that chart that a
beauty Well there are tons of hybrids in between all
of these styles but at the end of the day
it's all about risk and reward and time And for
most people the worst thing they khun dio is stay
high and dry fully out of the investing pool because
over time the markets go up so no your objective
know your style and whatever you do don't make kanye 00:02:37.313 --> [endTime] cry
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