What does turnover rate mean?

Turnover rate in finance refers to the frequency at which an asset or investment is bought and sold within a specific period of time. It is a measure of the liquidity and trading activity of an investment portfolio, and is often used to assess the efficiency of an investment strategy. A high turnover rate indicates that a large portion of the portfolio is being bought and sold, which can result in higher transaction costs and potential tax implications. On the other hand, a low turnover rate suggests that the portfolio is being held for longer periods of time, which may result in lower transaction costs and tax liabilities. Turnover rate can also be used to assess the performance of mutual funds and other investment vehicles, as a high turnover rate may indicate higher management fees and expenses, which can impact overall returns. Additionally, turnover rate can provide insight into the trading behavior of investors, as a high turnover rate may indicate frequent buying and selling, potentially driven by market volatility or investor sentiment. Overall, turnover rate is an important metric in finance as it provides valuable information about the trading activity and efficiency of investment portfolios and can be used to make informed decisions about investment strategies and portfolio management.