Explained: What are rolling returns in mutual funds and how do you calculate them?

Rolling returns measure a mutual fund scheme’s annualised returns over a specified period, calculated at regular intervals such as daily, monthly or yearly. By averaging returns across multiple overlapping periods, they provide a more comprehensive view of a fund’s performance and consistency over time. Compared with trailing returns, which reflect performance up to a single point in time, rolling returns can offer a more balanced assessment of how a fund has performed across different market conditions.

Trailing returns have a recency bias and point-to-point returns are specific to the period taken for analysis. On the other hand, rolling return measures the fund's absolute and relative performance across all time periods without any bias.

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Rolling returns gives a comprehensive picture of the performance by a fund. Due to different time periods involved, the return consistency of the fund over a defined time period can be analysed efficiently as it considers both upstream and downstream in the market.

Looking to calculate rolling returns for your mutual fund investments in excel? Here is how you can calculate:

Suppose you are investing in an ABC fund for a time period of five years as this time frame is the minimum horizon an equity investor should have.

Step 1: Assuming an investor wants to test the five year returns of an ABC scheme over 15 long years. Start with the daily NAV of the scheme. The start date will be January 2, 2013 to January 2, 2018.

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Step 2: If you want to calculate a two -year rolling return for the scheme then start from 2015. Take NAV of January 2, 2013 and January 2, 2015.

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Step 3: Again calculate returns if you start your investment on January 3, 2013 for five years. Move the date by one day i.e. January 3, 2013 and January 3, 2015.

January 2, 2013 - 100.83

January 2, 2015 - 160.22

Using CAGR formula = (160.22/100.83) ^ (1 / 2 ) -1

CAGR = 26.06%

Step 4: Calculate CAGR for the next set of dates

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Step 5: Now you have two year rolling returns, calculate the average of all the two year return

Step 6: The average obtained is rolling return for your mutual fund investments in a five year period rolled on a two year basis.

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