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

  1. They are the most relevant performance parameter for mapping mutual fund performance
  2. Uses historical data for a block of period
  3. 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

  1. It is accurate
  2. It is reliable
  3. It is highly effective in measuring the performance of mutual funds
  4. It is unbiased with respect to the time frame
  5. Good for SIP investors
  6. 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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