Trailing & Rolling returns – Meaning, Calculation & Importance

Trailing and rolling returns are two common ways to measure mutual fund performance. While trailing returns show returns between two fixed dates, rolling returns help investors understand how consistently a fund performed across different market cycles.

Key Highlights:

• Trailing returns show mutual fund performance over fixed time periods.
• Rolling returns measure consistency across different market cycles.
• Rolling returns are considered more reliable for fund comparison.

Trailing returns

Trailing returns are the returns generated over a given period. It can be the year to date (YTD), one year, three years, and so on. These are also called point to point returns. Trailing returns are the most relevant measures to evaluate the performance for a mutual fund.

Example:
Assume an investment of ₹1,00,000 in a mutual fund on 1 June 2023, where its value has grown to ₹1,40,000 on 1 June 2026.

Let’s calculate the trailing return using the formula:

Trailing Return (CAGR) = [(Ending Value ÷ Beginning Value) ^ (1 ÷ n)] − 1 

• CAGR = [(1,40,000/1,00,000)^(⅓)]-1
• CAGR = 11.87%

This means the fund generated an average annual return of around 11.87% over the last 3 years.

Features of Trailing returns

Most relevant Used by mutual funds to publish performance over different time blocks:

• Historical data is used for a block of period
• Data is easily present at any point in time

Examples of Trailing returns

The following example shows trailing returns of ELSS mutual funds across different fixed investment periods such as 3 months, 1 year, 3 years, and 5 years:

Rolling returns

Rolling returns measure a mutual fund’s performance across multiple time periods instead of just one fixed period. This helps investors understand how consistently the fund has performed during different market conditions.

Example: Example: Suppose you want to check the 3-year rolling returns of a mutual fund from January 2015 to January 2025. You first calculate the annualised return from January 2015 to January 2018. 

Then, you move the period forward by one month and calculate returns from February 2015 to February 2018, then March 2015 to March 2018, and so on until January 2025.

This method helps investors understand how consistently the fund performed across different market conditions instead of relying on returns from just one fixed period.

Advantages of Rolling Returns

• Shows consistency
• Reduces period bias
• Better for SIP investors
• Helps compare long-term performance

Examples of Rolling returns in Mutual Funds

The following example shows rolling returns of mutual funds across multiple time periods to measure return consistency over different market conditions:

The trailing return will show the way a fund has performed in the long run. Yet, it’s difficult to understand from this data as to how consistent the fund was during good and bad times which affects the return per cent to an investor.

Note: Data in the above tables are for educational purpose only do not consider it as an investment

Difference Between Trailing Returns and Rolling Returns

Trailing vs Rolling Returns which is Better?

Rolling returns are generally considered a better measure of mutual fund performance because they show return consistency across different market periods.

Trailing returns are useful for quick comparisons, but rolling returns provide a clearer picture for long-term investors and SIP investors.

Conclusion

Trailing returns help investors understand how a mutual fund performed over a fixed period, while rolling returns show how consistently the fund delivered returns across different market conditions. For long-term and SIP investors, rolling returns are often considered a more reliable way to evaluate mutual fund performance.