Excessive trading can be difficult to spot. Here's what to look for:
Excessive trading can be difficult to spot — that is, until you look back and see how much money it took out of your accounts.
Excessive trading, also known as quantitative suitability, depends on numerous factors, including a client’s portfolio targets, risk tolerance and assets, as well as various calculations, including turnover rate, which measures how much a mutual fund or other portfolio holding has changed over a specific period of time, and cost-to-equity ratio, which represents the percentage of the client’s portfolio returns needed to clear the cost of commissions and fees, according to Finra.
There are a few ways to spot excessive trading, including finding trades your broker made without your knowledge or authorization . Clients should also pay close attention to fees that seem exaggeratedly high for all or part of your portfolio, according to the Securities and Exchange Commission. Also see: 4 critical questions to ask during a market downturn — and how financial advisers answer them
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