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Rolling Returns: Metric to Evaluate a Fund

Rolling returns are the returns calculated over a continuous period of time. Which means that a particular period of returns is taken at regular intervals over a period of time.

For example, you can take returns every month for 3 years for SENSEX. This will tell you how 1-year returns for SENSEX have moved.

In short, Rolling Returns is an average series of returns over a longer period of time.It is like a daily SIP for a certain interval and then taking an average.

Judged through the rolling lens, some funds that currently appear at the top of their game later look less noteworthy.

Below is the Historical Data of SENSEX which will help us to understand the concept of Rolling Returns over different periods more clearly:-

Returns%
Date Sensex 1 Year 5 Year 10 Year 15 Year 20 Year 25 Year
31-Mar-90 781 9%
31-Mar-91 1,168 50% 15%
31-Mar-92 4,285 267% 53%
31-Mar-93 2,281 -47% 42%
31-Mar-94 3,779 66% 40%
31-Mar-95 3,261 -14% 33%
31-Mar-96 3,367 3% 24%
31-Mar-97 3,361 -0.20% -5% 21%
31-Mar-98 3,893 16% 11% 26%
31-Mar-99 3,740 -4% -0.20% 18%
31-Mar-00 5,001 34% 9% 20%
31-Mar-01 3,604 -28% 1% 12% 13%
31-Mar-02 3,469 -4% 1% -2% 14%
31-Mar-03 3,049 -12% -5% 3% 15%
31-Mar-04 5,591 83% 8% 4% 15%
31-Mar-05 6,493 16% 5% 7% 15%
31-Mar-06 11,280 74% 26% 13% 16% 16%
31-Mar-07 13,073 16% 30% 15% 8% 18%
31-Mar-08 15,644 20% 39% 15% 14% 20%
31-Mar-09 9,709 -38% 12% 10% 6% 14%
31-Mar-10 17,528 81% 22% 13% 12% 17%
31-Mar-11 19,445 11% 12% 18% 12% 15% 15%
31-Mar-12 17,404 -10% 6% 18% 12% 7% 15%
31-Mar-13 18,836 8% 4% 20% 11% 11% 17%
31-Mar-14 22,386 19% 18% 15% 13% 9% 15%
31-Mar-15 27,957 25% 10% 16% 12% 11% 15%
31-Mar-16 25,342 -9% 5% 8% 14% 11% 13%
31-Mar-17 29,621 17% 11% 9% 15% 11% 8%
31-Mar-18 32,969 11% 12% 8% 17% 11% 11%
31-Mar-19 38,673 17% 12% 15% 14% 12% 10%
31-Mar-20 29,321 -24%  1% 5% 11% 9% 9%

    To make it more precise we also have categorized it into a simpler form:-

SENSEX Yearly 5 Years 10 Years 15 Years 20 Years 25years
Rolling Return Occurrences 41 37 32 27 22 17
Negative Return Occurrences 14 3 1 0 0 0
Probability of Loss 33% 8% 3% 0% 0% 0%

As we can see, on a rolling basis, the chance of losing is nearly none if you invest for longer term.

So when should I start investing and what investment strategies to follow? 

No matter when you invest, you need to plan your investments. It is as similar as visiting a new destination, you need to plan all activities before reaching there and a destination map is essential. For your financial future, the destination map is an Investor Policy Statement. An IPS clearly defines your future financial goal and how you can achieve them. 

There are few points that one should keep in mind while making any investment decisions:

  • Have you tapped the right investment product that is fit for you?
  • Do you have life insurance to cover you and if yes then is it right for you?
  • If any debt investments are made, Will they provide you required returns over the time period you hold them?
  • Are Equity investments providing enough returns given the risk attached? Are they good for you?
  • Will this planning help you reach your financial goals.

Above and many more minute details are to be considered while making Investment plans. An IPS is the next best tool you should have while making any investment to achieve your financial goal. The more details you know about your investments, the better direction you will have in order to hit your desired financial goals.

Considering making an IPS? Our financial advisors are here to guide you through your financial journey!

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We are here to help you!

 

 

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