Turnover measures how much of your portfolio changes hands. It is the metric that decides whether a backtest survives contact with brokerage, taxes and slippage.
The convention saral.money uses
At every reconstitution, saral.money counts the orders placed and divides by the number of holdings, then averages that figure across all reconstitutions in the backtest. Both legs are counted, so this is a two-way, name-count measure.
Worked example: a 20-stock portfolio replaces 5 names at a rebalance. That is 5 sells and 5 buys, so 10 orders against 20 holdings, and the Avg Turnover tile reads 50%. A one-way convention would call the same event 25%.
This matters when you compare against published index factsheets. NSE index methodology documents generally quote one-way turnover, so a saral.money figure will read about twice as large for identical activity. Halve it before comparing.
What turnover costs you
| Rebalance cadence | Rough one-way turnover per year | Cost sensitivity |
|---|---|---|
| Annual | 20% to 60% | Negligible for most retail books |
| Quarterly | 60% to 200% | Noticeable, still manageable |
| Monthly | 200% to 500% | Costs become a real drag on CAGR |
| Weekly or faster | Above 1,000% | Costs frequently exceed the edge |
Illustrative arithmetic on the drag. Suppose a quarter of the book is replaced each month, so you buy 25% and sell 25% of portfolio value monthly. At a round-trip cost of 0.30% of traded value, the monthly drag is 0.25 x 0.30% = 0.075%, or roughly 0.9% a year off your CAGR before anything else goes wrong. On Indian delivery equity that 0.30% is not conservative once you add STT of about 0.1% per side, stamp duty, exchange and SEBI charges, GST on brokerage, and the spread you actually paid.
Caveats
The name-count convention ignores position size. Swapping two 1% positions counts the same as swapping two 8% positions, even though the second costs eight times as much. A value-weighted turnover figure would differ, sometimes substantially.
Turnover is also a liquidity problem, not only a cost problem. High turnover in thin small-caps means your fills drift away from the backtested price, and the gap widens with capital.
Low turnover is not automatically better. Cutting rebalance frequency to save costs can decay a momentum signal faster than the savings accrue. Test both, and compare net of costs.