When we invest in mutual funds, most of us usually look at past returns like 1-year, 3-year, or 5-year performance. But this does not always give the full picture. A fund might have done really well in one year and poorly in another. That is where Rolling Return in mutual funds become important.
Rolling Return in mutual fundsshow you how the fund has performed across different time periods consistently, instead of just looking at a single point in time. It is one of the best ways to check if a fund delivers steady performance over the years.
What are Rolling Return in mutual funds?
Rolling return is a smart way to check how a mutual fund has really performed over time. Unlike normal return calculations that only look at a fixed start and end date, rolling returns of Mutual Funds give you a continuous and overlapping view of performance. In easy terms, it indicates the mean annual return of a fund over various disparate time intervals in an extended investment horizon.
How to Check Rolling Return in mutual funds ?
Now, let’s go step by step on how you can check Rolling Return in mutual funds :
Step 1: Collect Fund Information
First, pick the mutual fund you want to check. The best place to get information is the official website of the fund house. The platforms give you detailed fund performance data in an easy-to-read format.
Step 2: Look for Historical Data
On the website, search for a section called Performance or Historical Returns. This section shows how the fund has performed in the past across different years.
Step 3: Decide the Rolling Period
Rolling returns are checked for specific periods. Common ones are:
- 1-year rolling return
- 3 years rolling return
- 5 years rolling return
For example, a 3-year rolling return means you see how the fund performed in every 3-year block within the chosen time frame.
Step 4: Collect NAV Data
Rolling Return in mutual funds require the calculation of the Net Asset Value (NAV) of the funds. NAV is the daily quoted price of a unit of the fund. This information is available most of the time, as most websites will have it without you having to compile it manually.
Step 5: Calculate Rolling Returns
If you enjoy working with numbers, you can calculate Rolling Return in mutual funds using a spreadsheet by entering the NAV data. But if that feels complicated, don’t worry. Many financial websites and broker platforms offer online rolling return calculators that do the math for you instantly.
Step 6: Review and Compare
Once you have the rolling return results, compare them with other funds in the same category. A good fund shows stable and consistent returns across different time periods. This helps you judge whether the fund is reliable for long-term investment.
How are Rolling Returns Calculated in Mutual Funds?
Working out Rolling Return in mutual funds might seem complicated, but it is really easy if you take a step-by-step approach. Follow this to do it:
Step 1: Select a Start Date
Choose the date you want to begin from. This would be the start of the year, quarter, or any date that you want to look up.
Step 2: Choose the Time Span
Decide which span you want to analyse: 1 year, 3 years, 5 years, or shorter periods like monthly or quarterly. This will be determined by how detailed an analysis you want to have.
Step 3: Move the Period
Now, calculate the return for your selected period using your starting date. Then, shift the first date (one day, one week, or one month) and calculate. Continue this process until you are at the end of the period.
Step 4: Find the Average
Once you have collected all these returns, calculate the average return. This final figure is called the Rolling Return in mutual funds.
This method shows how consistent the fund has been, not just how it did in one lucky (or unlucky) period.
Example of Rolling Returns in Mutual Funds
Let us learn with an example. Consider a mutual fund that delivered the following year-on-year returns over the past 5 years:
- Year 1: 8%
- Year 2: 12%
- Year 3: 5%
- Year 4: 15%
- Year 5: 9%
Now, let’s calculate the 3-year rolling returns step by step.
🔹 First 3-Year Period (Year 1–3)
Take the returns of the first three years and find the average:
(8% + 12% + 5%) / 3 = 8.33%
🔹 Second 3-Year Period (Year 2–4)
Now shift the period forward by one year (Years 2, 3, and 4):
(12% + 5% + 15%) / 3 = 10.67%
🔹 Third 3-Year Period (Year 3–5)
Again, move forward by one year (Years 3, 4, and 5):
(5% + 15% + 9%) / 3 = 9.67%
Final Rolling Return in mutual funds
So, the 3-year rolling returns of this mutual fund are:
- 8.33%
- 10.67%
- 9.67%
From these figures, you can observe that the performance of the fund is quite steady, between 8% and 11%, for most of the time. There is no extreme fluctuation, which indicates that the fund has remained steady and dependable over the years.
Why are Rolling Return in mutual funds Important?
Rolling returns are loved by investors and experts because they give a realistic view of performance. Here is why they matter:
Check Consistency – You can see if the fund regularly delivers steady returns or has just had one-off good years.
Understand Volatility – They help you know how bumpy the ride was, so you can decide if the fund matches your risk appetite.
Compare with Benchmarks – Rolling returns can be compared with market indices (like Nifty or Sensex) or with other funds. This shows whether your fund is truly beating the market or not.
Advantages of Rolling Return in mutual funds
Rolling returns are also one of the best measures to analyze mutual fund performance. This provides investors with a reasonable notion of consistency, risk, and dependability.
Here are the main advantages:
1. Measuring Consistency
Rolling returns help you find out if a mutual fund delivers steady performance year after year. For example, if a fund regularly shows returns between 9% 11% over multiple 3-year periods, it proves the fund is consistent.
2. Analyzing Risk
Rolling returns not only display profit – they also allow you to gauge volatility. One fund that moves from -5% to +20% is more risk-prone than one that remains between 9%–12%, though both have an equal average return. This assists you in aligning your choice of fund with your risk appetite.
3. Comparing Performance
You can easily compare multiple funds using rolling returns. For instance, if Fund A and Fund B both show an average of 10% returns, rolling returns will reveal whether Fund A delivered this steadily, while Fund B had big ups and downs.
Applications of Rolling Returns
1. Performance Assessment
Rolling returns give a dynamic view of how a fund performs in bull markets, bear markets, and sideways markets. This helps you spot issues like long periods of underperformance.
2. Portfolio Optimisation
By comparing rolling returns of different funds, you can build a balanced portfolio. For example, pairing one stable fund with another high-growth but volatile fund can reduce overall risk.
3. Benchmarking Tool
They allow you to compare a fund’s performance with a benchmark index (like Nifty 50 or Sensex). This shows if your fund is actually beating the market or just following along.
4. Strategy Adjustment
Rolling returns help identify the best holding period for a fund. For instance, some funds may deliver well only if held for 5 years, while others perform strongly even in shorter 1–2 year periods.
5. Risk Management
Rolling returns emphasize risk-adjusted performance. This makes your portfolio profitable, as well as according to your risk comfort level.
When to Use Rolling Returns for Investment Decisions?
Rolling returns are not just for mutual funds – they can be applied across different investments. Here is when you should consider using them:
🔹 Bond Investments
They allow you to measure the impact of interest rate changes on bonds or bond ETFs. You can also analyze credit risk and stability over time.
🔹 Mutual Funds and ETFs
Rolling Return in mutual funds help you check if a fund manager is delivering consistent results. You can also compare different funds to pick the one that best matches your goals.
🔹 Real Estate Investments
Rolling Return in mutual funds can be employed to monitor rental income, property worth, and market movements. This assists you in determining whether to acquire, sell, or retain real estate assets.
🔹Equity Investments
You can apply Rolling Return in mutual funds to individual stocks or equity funds. This shows you not only the returns but also how steady or volatile the stock’s performance has been.
How to Compare Mutual Funds Using Rolling Returns?
When comparing mutual funds, don’t just look at the average return. Instead, check how the fund performed across different rolling periods.
Example:
- Fund A: 3-year rolling returns range between 8–11% (steady).
- Fund B: 3-year rolling returns range between -2% and +18% (unstable).
Although both funds might demonstrate an average of 10%, Fund A is more stable and less volatile, while Fund B is riskier with greater fluctuations.
Conclusion
By comparing Rolling Return in mutual funds, you may select the fund that suits your investment needs and risk tolerance. Let us be more precise: if you want to know how a fund performed during the previous 5 years, you don’t just look at one 5-year period. What you do is look at every single 5-year period (such as Jan 2020 –Jan 2025, Feb 2020 – Feb 2025, etc.).
