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How is mutual fund portfolio turnover calculated?

The rules related to the Simplified Prospectus for mutual funds provide a standard method for calculating portfolio turnover. The calculation is -

Divide the lesser of the amounts of the purchases and sales of portfolio securities for the financial year by the average of the value of the portfolio securities owned by the mutual fund in the financial year. Calculate the monthly average by totaling the values of portfolio securities as at the beginning and end of the first month of the financial year and as at the end of each of the succeeding 11 months and dividing the sum by 13. Exclude from both numerator and denominator amounts relating to all securities having a remaining term to maturity on the date of acquisition by the mutual fund of one year or less. The rules [National Instrument 81-101 ( NI 81-101)] can be found on the Ontario Securities Commission web site at www.osc.gov.on.ca - Rules What is the significance of the portfolio turnover rate? The portfolio turnover rate measures how actively the sub-advisor manages the portfolio’s investments. For example, a portfolio turnover rate of 100 per cent may mean the sub-advisor purchased and sold each investment in the portfolio once during the year.