The portfolio turnover rate measures how frequently the fund manager buys and sells securities within a mutual fund's portfolio over a one-year period, expressed as a percentage of the fund's average assets. A turnover rate of 100% means the entire portfolio was replaced once during the year. High turnover indicates an active trading approach, which may generate higher transaction costs and short-term capital gains that can reduce after-tax returns. Low turnover is associated with a buy-and-hold philosophy and lower costs. SEBI requires mutual funds in India to disclose portfolio turnover rates in their factsheets, enabling investors to assess the fund's trading intensity.
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