Annual Turnover
Annual turnover is the percentage rate at which something changes ownership over the course of a year. For a business, this rate could be related to its yearly turnover in inventories, receivables, payables, or assets.In investments, a mutual fund or exchange-traded fund (ETF) turnover rate replaces its investment holdings on a yearly basis. Portfolio turnover is the comparison of assets under management (AUM) to the inflow, or outflow, of a fund's holdings. The figure is useful to determine how actively the fund changes the underlying positions in its holdings. High figure turnover rates indicate an actively managed fund. Other funds are more passive and have a lower percentage of holding turnovers. An index fund is an example of a passive holding fund.
Definition:
Annual turnover refers to the percentage change in ownership over a year. For businesses, this rate can be related to the turnover of their annual inventory, accounts receivable, accounts payable, or assets. In investment, annual turnover typically refers to the frequency with which mutual funds or exchange-traded funds (ETFs) change their investment holdings each year.
Origin:
The concept of annual turnover originated in the fields of accounting and financial management to measure the operational efficiency and management strategies of businesses or funds. With the development of financial markets, this indicator has been widely used to assess the management style and activity level of investment funds.
Categories and Characteristics:
1. Business Annual Turnover: Mainly used to measure the turnover rate of a company's inventory, accounts receivable, accounts payable, or assets. A high turnover rate usually indicates high operational efficiency and good capital utilization.
2. Investment Fund Annual Turnover: Used to measure the activity level of fund management. A high turnover rate indicates that the fund manager frequently adjusts the investment portfolio, actively managing it; a low turnover rate indicates a passive management strategy, such as index funds.
Specific Cases:
1. Business Case: A retail company had an inventory turnover rate of 5 times in 2023, meaning the company's inventory was completely replaced 5 times in a year. A high inventory turnover rate indicates good sales performance and efficient inventory management.
2. Fund Case: A mutual fund had an annual turnover of 150% in 2023, meaning the fund's investment portfolio was completely replaced 1.5 times in a year. A high turnover rate indicates that the fund manager actively adjusts the investment portfolio to seek higher returns.
Common Questions:
1. Is a high annual turnover always good?
Not necessarily. A high turnover rate may mean high transaction costs and tax burdens, so investors need to weigh these costs against potential returns.
2. How to determine the management style of a fund?
By looking at the fund's annual turnover, one can initially judge its management style. A high turnover rate usually indicates active management, while a low turnover rate indicates passive management.
