What is the advantage of rolling returns over point-to-point holding period returns?
Rolling returns compute, for example, every one-year return within three years and average them, giving a truer picture of consistency.
The concept: Measuring returns
Worked example
₹1,00,000 grows to ₹1,61,051 in 5 years. CAGR = (1.61051)^(1/5) − 1 = 10% a year. The simple return is 61.05%.
Exam trap: For an IDCW-paying scheme, a return calculated only from NAV change understates the true return.