CandleFocus

Rolling Returns

Candlefocus Editor
Rolling returns are a vital component of a financial portfolio’s performance measures and can be used to determine the annualized average return over a certain period of time. Rolling returns often employ a twelve-month period, such as trailing 12 months (TTM), in order to smooth out the potential volatility associated with single-instance returns. Fund managers use them in assessing the relative appeal of different investments, while investors can use rolling returns to gauge the performance of their portfolio over a specified period.

The rolling return period selected depends on how frequently a person or institution wishes to review the financial performance of their portfolio. For example, they may choose to examine the returns over a 12-month or a three-year period, depending on their objectives. While the 12-month period allows for a current snapshot of an investment’s performance, looking over the three-year period generally provides a clearer understanding of a longer-term trend.

By taking several instances into account, rolling returns help to provide investors with more accurate insights into the performance of their funds. Investors can also compare their own portfolio performances with those of others in order to determine which funds are best performing over a certain period. This is helpful as it allows investors to recognize which funds have been successful over a longer period and potentially seek to replicate the same returns or increase their investments into those funds.

In conclusion, rolling returns are widely employed in assessing the performance of portfolios and investments. These returns offer a more accurate representation compared to single-instance returns, providing a comprehensive view of performance over a certain period. Investors and fund managers alike can use rolling returns to identify areas of underperformance and opportunities to capitalize on returns and improve their investments.

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