WHAT ARE TRAILING RETURNS?
YTD or Year-To-Date returns which are most recent in nature are called trailing returns. There are the results mapped for a specific time frame in a certain pattern like 1-year, 3-year 5-year returns in a row. They have another name as point-to-point returns. They are amongst the most relevant and most used performance parameter for mutual funds. Trailing returns work on the assumption that the investor will stay invested over a long-term. They highlight the excellent 7-year or 10-year performance but pay a little heed to the 3-year or 5-year one. The monthly, quarterly, yearly or half-yearly investments is not accounted for while mapping through trailing returns, lump sum investment is assumed by default.
The returns are calculated as any change in the price of a share over a recent time period + dividends earned per share in the same time frame (if any).
Characteristics of trailing returns
- They are the most relevant performance parameter for mapping mutual fund performance
- Uses historical data for a block of period
- Easy availability of data
Trailing returns Examples
| Scheme | Trailing return %age | |||
3 Month | 1 year | 3 year | 5 year | |
| SBI MAGNUM TAX GAIN SCHEME 1993- REGULAR, GROWTH PLAN | -2% | 16.40% | 7.10% | 17.10% |
| ADITYA BIRLA SUN LIFE TAX PLAN-REGULAR, GROWTH PLAN | -0.40% | 25.80% | 11.30% | 21.10% |
| HDFC TAX SAVER GROWTH PLAN | -3.50% | 17.10% | 8.90% | 18.20% |
WHAT ARE ROLLING RETURNS?
Rolling returns are the average annualized returns mapped for a specific period every month/ week/day till the last day of the specified period. Rolling returns take into account funds relative and absolute performance over a certain period of time at regular intervals.
Let us understand this with an example, for a particular fund, over a certain time period, the rolling returns would be measured as: Return every 3 months from 2011-2016. This would be 3-monthly return for a time frame of 5 years regularly.
Rolling returns take several such frames for a particular fund and see how the fund has performed. Since various intervals are taken into consideration, the market volatility is also accounted for as during a 5-year span, it is very unlikely that the markets stayed consistent.
Benefits of Rolling returns
- It is accurate
- It is reliable
- It is highly effective in measuring the performance of mutual funds
- It is unbiased with respect to the time frame
- Good for SIP investors
- Computes mean return of the fund
Example of rolling returns
| Scheme | Rolling Return %age | Return Consistency (%age of times) | ||||||||
| Average | Median | Maximum | Minimum | 0-5% | 5-10% | 10-155 | 15-20% | >20% | ||
| SBI MAGNUM TAX GAIN SCHEME 1993- REGULAR, GROWTH PLAN | 12.41 | 12.04 | 18.13 | 7.04 | 0 | 12.4 | 74.38 | 13.22 | 0 | |
| ADITYA BIRLA SUNLIFE TAX PLAN- REGULAR, GROWTH PLAN | 17.76 | 17.39 | 24.54 | 11.3 | 0 | 0 | 13.22 | 71.07 | 15.7 | |
| HDFC TAX SAVER GROWTH PLAN | 12.2 | 11.45 | 19.52 | 8.17 | 0 | 13.22 | 74.38 | 12.4 | 0 | |
Hence, rolling return is a comprehensive method of analyzing the fund’s performance over several parameters in a given block of time segregated under smaller frames while trailing returns defines the fund performance in the long-run under bigger blocks of time.
Rolling returns are a better way of mapping the fund for its performance and helps recurring investors or SIP investors to analyze funds accordingly.
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