The Complete Guide To Mutual Funds Rolling Returns

The Complete Guide To Mutual Funds Rolling Returns

By Yash


Mutual funds can be considered one of the best investment channels for small and large investors. It is a great tool for investors who do not want to directly get involved in the financial markets. There are many people who do want to invest in some type of mutual fund instrument. This is the reason behind the huge popularity of such mutual fund instruments all over the globe. But sometimes, the various financial terminologies related to mutual funds confuse many investors. One of them is the rolling returns of mutual funds. What are they, and what advantages do they provide over other kinds of returns? This guide provides all the information required to start making those profits. You will get complete clarity on mutual fund rolling returns, which will help you start investing in mutual funds without hesitation or doubt.


Benefits of Mutual Fund Rolling Returns

It ensures accuracy and no time bias. These refer to annualized average returns of a fund over a particular period. This period can be weekly, monthly, or yearly. Over this period, the fund's absolute and relative performance is measured at regular intervals. An example of this would be a fund's returns for a decade for half a year. This detailed and long-term calculation of returns ensures greater accuracy in the evaluation of fund performance. Also, since the calculation of returns is done over all the periods, it ensures that no time bias creeps into the results. It is highly investor-friendly. Rolling returns of mutual funds provide clear and accurate reports and thus ensure greater reliability. It provides proper insights which are effective and simplified and thus is highly suitable for a SIP investor or a recurring investor with a monthly or quarterly saving plan. Further, it indicates a fund's goodwill to the investor by computing its mean return.

It is better than trailing returns. Rolling returns have shown more consistent and accurate results than trailing returns. This is because of the method used to calculate the latter. In this method, the annualized return over a particular trailing period to date is calculated. For example, if a mutual fund were bought a year ago for $100 and sold today at $105, the trailing return would be 5%. But if the fund's value drops to $103 tomorrow, the results become inaccurate for 1 year. This proves that if the mutual fund's value experiences a major swing on the day of observation, the return may not show accurate results. But since the rolling returns take the average value over a fixed period, the fluctuations are evened out, and it gives a more accurate result than trailing returns. 


Mutual Fund Rolling Returns vs. Trailing Returns

The trailing returns of mutual funds are hinged on a couple of price points. So, a usual trailing return of some years means that annualized difference between the net asset value at the beginning against the end of the period. On the contrary, mutual fund rolling returns are the average annualized returns taken for a certain period on any selected frequency, such as weekly or monthly, until the end of that period. For instance, going back a couple of years, every day, you can find out the returns over the elapsed duration and the average. The trailing return depends on one being lucky. It is the return in which you have invested on a particular day and taken out the money on another day. But if you are someone who invests on a given day in a year and then keeps holding it till the end of the year. Then the chances of getting those returns are shown in a rolling return after averaging the returns for a certain period. Thus, the mutual fund rolling returns are better for you as it reflects that chance well.

But you must keep in mind that the performance that was there in the past is not a complete guarantee of future performance. When the mutual fund rolling returns and the trailing returns are nearly similar over a lengthier period, it shows that the mutual funds have performed steadily and the entry and exits are not too reproving. Many investors in the financial markets believe that investing through systematic plans at regular plans is a good way to invest in the markets. The mutual fund rolling returns are considered more credible and workable in that situation. When you factor in a longer period to find out the performance of any mutual fund, the rolling returns are more flexible to the fluctuations in the financial markets as compared to trailing returns. So, we can safely say that if you calculate the trailing returns, you will be able to find out how the mutual fund has performed in the long run from a certain date to another date.

But you will not be able to find out the consistency of the mutual fund and how it has performed in good or bad times. This is where the mutual fund rolling returns show better viability than the trailing returns. The mutual fund rolling returns assist you in examining and finding out the overall performance of any mutual period over a certain period at certain intervals, which gives the investor more precise information.



It's time to use rolling returns of mutual funds to your advantage. So, what are you waiting for? After learning all the advantages of rolling returns of mutual funds, there should be no confusion left. The mutual fund rolling returns can help precisely ascertain a mutual fund's performance. It will help you to decide whether you should invest in the instrument or not. You may be hesitant or doubtful about getting involved in the financial markets or investing in instruments such as mutual funds. Then, the rolling returns are the perfect tool for you to remove your doubts about going ahead with your investments. Thus, opt immediately for this investor-friendly return method, and reap great profits. Happy investing to you, and may you have a very profitable journey in the financial markets!