Definition of 'Annual Turnover'
The percentage rate at which a mutual fund or exchange-traded fund replaces its investment holdings on an annual basis. Turnover is meant to adjust for the inflows and outflows of cash and report on the level of trading activity in the fund.
Investopedia explains 'Annual Turnover'
Annual turnover is a good way to inspect the average time horizon a fund employs. Higher turnover levels will generally add to the expense ratio of a fund and could increase capital gains distributions.
Benchmark funds like the S&P 500-matching SPDRs have very low turnover, usually less than 10% per year. On the other end of the spectrum, some funds employ highly active trading strategies that push annual turnover past 100% per year (100% is a full turnover of the portfolio).