Multiple choice

Portfolio turnover rate refers to

  1. ratio of sales to the net assets of the fund

  2. ratio of purchases to the net assets of the fund

  3. ratio of sales or purchases (which ever is lower) to net assets of the fund

  4. ratio of sales or purchases (which ever is higher) to net assets of the fund
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Portfolio turnover uses the lesser of purchases or sales divided by average net assets. Using the lower figure prevents double-counting round-trip trades and provides a conservative measure of actual portfolio churning. This standardized calculation allows meaningful comparison across funds regardless of their trading direction.

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