If a car dealership does a poor job taking care of its salesforce, it won’t take long for them to quit. Working as a car salesman can be a stressful job especially if strict quotas must be met on a weekly basis. This environment can cause a high turnover for the salesmen that work at the dealership.
In comparison, portfolio managers can buy and sell securities within their investment portfolios at either a high or low rate. Depending on the portfolio manager’s investment objective, trading securities more frequently increases the portfolios turnover rate. If certain securities are performing poorly due to market conditions, this economic environment will increase turnover. It is important to note that portfolio turnover is not automatically attributed to a negative situation.