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Ramalingam Kalirajan |8327 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 04, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Jun 26, 2024Hindi

How to check rolling returns for both sip & one time which app is best to check rolling returns THANK YOU IN ADVANCE

Ans: Understanding rolling returns is vital to evaluate the consistent performance of mutual funds. However, while there are apps to check rolling returns, they might not always provide the depth and reliability you need. Let’s break this down:

Understanding Rolling Returns
Rolling returns provide a comprehensive view of a mutual fund's performance over different periods. Unlike point-to-point returns, which only consider the start and end dates, rolling returns give you average returns over various time frames within a specified period.

Why Rolling Returns Matter
Consistency: They show how consistently a fund has performed across different time periods.

Volatility Insight: Rolling returns help understand the volatility and reliability of returns over time.

Better Benchmarking: They are more effective for comparing funds, as they smooth out anomalies and one-time events.

Checking Rolling Returns for SIP and Lump Sum Investments
Rolling Returns for SIP
For SIP (Systematic Investment Plan), rolling returns are calculated by considering the periodic investments and evaluating how these investments have performed over time. This helps you understand the average return you might expect if you started a SIP at any point within a given period.

Rolling Returns for Lump Sum
For one-time or lump sum investments, rolling returns measure the fund's performance over different periods from the start date to various end dates. It shows the average return you could expect if you invested a lump sum amount at any point within the period.

Best Practices for Evaluating Rolling Returns
While apps can provide a quick look at rolling returns, they often lack the detailed analysis and personalized advice you might need. Here’s why consulting with a Certified Financial Planner (CFP) or Mutual Fund Distributor (MFD) is beneficial:

Apps: Quick but Limited
There are several apps and online tools that claim to offer rolling returns analysis. They provide a user-friendly interface and quick access to data, but there are drawbacks:

Limited Depth: Most apps provide basic rolling returns data without deeper insights into the underlying factors affecting performance.

Lack of Personalization: Apps don't consider your specific financial goals, risk tolerance, or investment horizon.

Data Reliability: The accuracy and timeliness of the data can vary across apps, leading to potential misinterpretation of fund performance.

Consulting Your CFP or MFD
A Certified Financial Planner (CFP) or Mutual Fund Distributor (MFD) offers significant advantages:

Expert Analysis: They can provide a detailed analysis of rolling returns, including how market conditions and fund management strategies affect performance.

Customized Advice: They tailor their advice to your individual financial goals, risk tolerance, and investment timeline.

Time-Saving: Professional guidance saves you time and helps you avoid potential pitfalls in interpreting data.

Recommended Approach
Here’s how you can proceed to check and understand rolling returns effectively:

Use Apps for Initial Checks: Use financial apps like Value Research, Morningstar, or Moneycontrol for a quick look at rolling returns. These apps are popular in India for mutual fund analysis.

Consult Your CFP or MFD: Discuss the rolling returns data with your Certified Financial Planner or Mutual Fund Distributor. They can provide deeper insights and advice on how to interpret the data in the context of your investment goals.

Combine App Data with Professional Guidance: Use the apps for general information and trends but rely on your CFP or MFD for detailed and personalized advice.

Rolling Returns Analysis in Practice
Let’s walk through a practical example to illustrate how rolling returns analysis works with professional guidance:

Scenario: Evaluating a SIP in Equity Fund
Imagine you have been investing Rs 10,000 monthly in an equity mutual fund via SIP for the last 5 years. You want to know how this fund has performed over various rolling periods to assess its consistency and potential for future growth.

Initial App Check: You open a financial app like Value Research and input your fund’s details. The app shows rolling returns for 1-year, 3-year, and 5-year periods. It shows the average returns you would have received if you started the SIP at any point within these periods.

Consulting Your CFP: You share this data with your CFP. They explain that while the app shows the fund has had decent average returns, they notice periods of high volatility that might not be ideal for your risk profile.

Customized Advice: Your CFP suggests a combination of this equity fund with a balanced fund to manage risk while still aiming for growth. They also recommend continuing to monitor the fund's performance and rebalancing your portfolio as needed.

Final Thoughts
While apps provide a convenient way to check rolling returns, they should not be your sole source of information. Rolling returns are a valuable tool for assessing mutual fund performance, but they require careful analysis and context to be truly useful.

Engaging with a Certified Financial Planner (CFP) or Mutual Fund Distributor (MFD) gives you access to expert insights, tailored advice, and a comprehensive view of your investments. They can help you understand not just the numbers but also the strategies to achieve your financial goals effectively.

So, make use of apps for quick checks, but rely on professional guidance for in-depth analysis and actionable advice. This approach ensures you’re making well-informed investment decisions that align with your long-term objectives.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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