This is the absolute return of an investment between two specific points in time. All you need to know is the value of your investment on these two dates to be able to calculate the return. However, since it takes into consideration only two points in time, it does not reflect the asset’s performance or volatility in the interim.
HOW IS IT CALCULATED?
If you invested in a mutual fund on 7 January 2023 and want to know the return you earned on 15 July 2024, find out the NAV for both these dates. So, if the initial NAV was Rs.128.5 on 7 January 2023 and rose to `173.5 on 15 July 2024, the point-to-point return will be calculated as follows.
What is rolling return?
This gives the return on an investment on a continuous basis for a specified duration. So, it’s the average, annualised return rolled over a selected frequency from the start to the end of the specified period. For instance, if you want to know the two-year performance of a mutual fund over four years, then the average two-year return will be calculated for each day of these four years. This will help the investor know how much return he would have earned if he had invested for two years at any point in these four years.HOW IS IT CALCULATED?
Suppose you want to know the two-year return of a mutual fund between 1 January 2020 and 1 January 2024. You will have to calculate the two-year CAGR on 1 January 2020 (1 Jan 2018 to 1 Jan 2020), two-year return on 2 January 2020 (2 Jan 2018 to 2 Jan 2020), and continue all the way for each day till 1 January 2024. This will give you the rolling return series for four years.WHICH ONE IS BETTER?
Rolling return gives a more comprehensive view of the asset’s performance and, hence, is more accurate. It offers a better historical perspective and analysis of an asset’s return because it is not affected by recency bias, that is, the market situation at the time of calculating the return, as happens in the case of point-to-point return. It is not affected by market volatility because it considers each day’s return for the entire duration.