What Are Rolling Returns and Why Do They Matter?
09 Jan 2025
Rolling Returns: A Key to Smarter Investing
What are Rolling Returns?s
Rolling return is a method for assessing annual return of a mutual fund scheme over various periods sssswithin a larger investment horizon.
Why Rolling Returns Matter?
Rolling returns offer a comprehensive picture of a fund's performance across various time frames, giving you deeper insights into its historical return trends. This approach allows you to gauge the fund's consistency under different market conditions. Additionally, it helps you assess fund volatility, enabling a more informed evaluation of the future performance of a mutual fund.
Rolling Return V/s Absolute Return
| Aspect | Rolling Returns | Absolute Returns |
|---|---|---|
| Time Period | Calculates returns for multiple overlapping periods (e.g., 1-year, 3-year). | Calculates total return for a fixed start and end period. |
| Market Volatility | Takes into account in short-term volatility, reflecting consistency in long-term performance. | Reflects total return without accounting for market fluctuations within the period. |
| Use Case | Best for assessing consistency and comparing mutual funds across different market cycles. | Useful for determining the total return over a fixed period, but less insightful for consistency. |
Illustration of Baroda BNP Paribas Large Cap Fund Reg Growth
Source: Baroda BNPP AMC
- Equity investing, with a minimum 5 year investing horizon, helps harness the power of compounding and reduces impact of market volatility
- Over longer tenures, the possibility of negative returns decreases and probability of clocking above average returns increases.
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