You see a mutual fund showing 18% returns over three years. Looks great, right?
You invest. A year later, your returns are barely 6%. What went wrong?
Here's what most NRIs don't realise: that "18%" figure was a point-to-point return. It measured performance between two specific dates. But those dates happened to be perfect.
The market was low when the period started. It was high when it ended.
At Belong, we've seen this confusion frustrate dozens of NRI investors in our WhatsApp community. They pick funds based on impressive-looking numbers, only to feel cheated later.
The problem isn't the fund. The problem is how returns are measured.
This guide explains the difference between rolling returns and point-to-point returns. You'll learn which metric actually shows how a fund performs and how to use this knowledge to pick better investments for your India portfolio.
What Are Point-to-Point Returns?
Point-to-point returns (also called trailing returns) measure a fund's performance between two fixed dates.
If you invested Rs 1 lakh on January 1, 2022 and your investment became Rs 1.3 lakh by January 1, 2025, your point-to-point return is 30% absolute or roughly 9.1% CAGR (compound annual growth rate).
This is the return you see everywhere. Mutual fund factsheets, investment apps, comparison websites. When someone says a fund gave "15% over 5 years," they're quoting point-to-point returns.
The calculation is simple:
Point-to-Point Return = [(Ending NAV – Starting NAV) / Starting NAV] × 100
For annualised returns (CAGR):
CAGR = [(Ending NAV / Starting NAV)^(1/years)] – 1
The simplicity is attractive. But that simplicity hides a dangerous flaw.
Why Point-to-Point Returns Can Be Misleading
Radhika Gupta, CEO of Edelweiss Mutual Fund, publicly criticised point-to-point returns in April 2025, calling the metric "broken" because one exceptional or poor year can skew the entire assessment (Business Today, April 2025).
Here's why:
The Timing Problem
Point-to-point returns depend entirely on your start and end dates.
Suppose a fund's NAV was Rs 100 on March 1, 2020 (just before COVID crashed markets). By March 2021, it was Rs 140. That's a 40% return in one year. Incredible, right?
But if you picked March 1, 2019 as your start (when NAV was Rs 120), the same March 2021 endpoint shows only 16.7% return over two years, or about 8% annually.
Same fund. Same endpoint. Completely different story.
The Recency Bias
Point-to-point returns show what happened at two moments. They hide everything in between.
Consider a fund that performed brilliantly for four years, then poorly for one year. If you measure 5-year returns ending during that poor year, the fund looks mediocre. If you measure ending right before that poor year, it looks exceptional.
Neither snapshot shows the full picture.
The "Lucky Window" Effect
Fund companies know this. That's why you'll sometimes see returns displayed for unusual periods like "4 years 8 months" instead of standard 5 years. They've picked the window that makes their fund look best.
👉 Tip: If a fund factsheet shows returns for unusual time periods, ask yourself why they didn't show standard 1/3/5/10 year returns instead.
What Are Rolling Returns?
Rolling returns solve the timing problem by measuring performance across multiple overlapping periods.
Instead of asking "What return did the fund give from January 2020 to January 2023?", rolling returns ask "What return did the fund give over every possible 3-year period in the last 10 years?"
Here's how it works:
For a 3-year rolling return analysis over 10 years:
- Calculate return from Jan 1, 2015 to Jan 1, 2018
- Calculate return from Jan 2, 2015 to Jan 2, 2018
- Calculate return from Jan 3, 2015 to Jan 3, 2018
- Continue until you've calculated returns for every possible 3-year period
You might end up with 1,500+ data points instead of just one.
From these data points, you can find:
- Average rolling return: The typical return you'd earn
- Maximum rolling return: The best-case scenario
- Minimum rolling return: The worst-case scenario
- Success rate: How often the fund beat its benchmark
This removes the luck factor from performance measurement.
Rolling Returns Calculation Example
Let's make this concrete with a simplified example.
Suppose a fund had these annual returns over 5 years:
- Year 1: 7%
- Year 2: 14%
- Year 3: 6%
- Year 4: 13%
- Year 5: 10%
Point-to-point return (5 years): Roughly 10% CAGR
3-year rolling returns:
- Years 1-3: (7% + 14% + 6%) / 3 = 9%
- Years 2-4: (14% + 6% + 13%) / 3 = 11%
- Years 3-5: (6% + 13% + 10%) / 3 = 9.67%
Average 3-year rolling return: 9.89%
The rolling returns tell you the fund consistently delivered around 9-11% regardless of when you invested. That consistency is valuable information that the single point-to-point figure hides.
(Groww - Rolling Returns Calculator)
Rolling Returns vs Point-to-Point Returns: Key Differences
Feature | Point-to-Point Returns | Rolling Returns |
|---|---|---|
What it measures | Return between two fixed dates | Returns across multiple overlapping periods |
Data points | Single number | Hundreds or thousands |
Timing bias | High - depends on start/end dates | Low - averages out timing luck |
Shows consistency | No | Yes |
Captures market cycles | Only if cycle fits the period | Yes, across all cycles |
Best used for | Quick snapshot | Thorough analysis |
Why Rolling Returns Matter for SIP Investors
If you're investing through SIP (Systematic Investment Plan), rolling returns are especially relevant.
SIPs spread your investments across different dates. Some months you buy when markets are high. Other months when they're low. Your actual experience isn't a single point-to-point return. It's more like an average of many different investment periods.
Rolling returns simulate exactly this reality. They show what investors who started at different times actually experienced.
A fund with high average rolling returns and low variance (small gap between best and worst periods) would have given most SIP investors a similar, positive experience. That's exactly what you want.
👉 Tip: When evaluating funds for your SIP, look at 5-year rolling returns over a 10-year period. This shows how the fund performed for investors who stayed invested for 5 years, regardless of when they started.
What Rolling Returns Reveal That Point-to-Point Hides
1. Consistency Across Market Cycles
Rolling returns capture bull markets, bear markets, sideways markets, and crashes. A fund that shows strong rolling returns has performed well across all these conditions.
This is crucial for NRIs. You're investing from abroad, often with limited ability to monitor markets daily. You need funds that perform regardless of market conditions.
2. Fund Manager Skill
A fund manager might beat the benchmark during bull markets simply by taking more risk. But rolling returns show whether they also protected capital during downturns.
As Mirae Asset MF notes: "A fund manager who is able to beat the benchmark in both bull and bear markets creates value for the investor without taking too much risk."
3. Downside Risk
The minimum rolling return tells you the worst-case scenario over your chosen period.
If a fund's 5-year rolling returns range from 6% to 18%, you know that even in the worst 5-year period, you'd have earned 6%.
Compare that to a fund with 5-year rolling returns ranging from -2% to 25%. The upside is higher, but you could actually lose money over 5 years.
Which fund matches your risk appetite?
4. Probability of Positive Returns
Rolling returns let you calculate how often a fund delivered positive returns over your investment horizon.
If a fund had positive 5-year rolling returns 95% of the time over the last 15 years, that's strong evidence it's likely to protect your capital over similar periods.
How to Use Rolling Returns to Pick Better Funds
Step 1: Choose Your Investment Horizon
Rolling return periods should match how long you plan to stay invested.
- 1-year rolling returns: Useful for short-term tactical decisions, but very volatile
- 3-year rolling returns: Good for medium-term goals
- 5-year rolling returns: Standard for equity mutual funds
- 10-year rolling returns: Best for long-term wealth building
For most NRIs building wealth for retirement in India or children's education, 5-year and 7-year rolling returns are most relevant.
Step 2: Compare Average Rolling Returns
Higher average rolling returns indicate better overall performance. But don't stop there.
Step 3: Check the Range (Max-Min)
A fund with 15% average rolling returns but a range of 2% to 35% is highly volatile. Another fund with 13% average but a range of 8% to 20% is more consistent.
The second fund might be better for risk-averse NRIs, even though its average is lower.
Step 4: Compare Against Benchmark
Rolling returns become most powerful when compared against the fund's benchmark index.
If a large-cap fund's 5-year rolling returns beat the Nifty 50 index 85% of the time, the fund manager is genuinely adding value.
If it beats the benchmark only 45% of the time, you might be better off with a low-cost index fund.
Step 5: Check Across Multiple Periods
Don't rely on just one rolling return period. Check 3-year, 5-year, and 7-year rolling returns together. Consistent outperformance across all periods is a strong signal.
👉 Tip: Free rolling return calculators are available on Value Research, Advisorkhoj, and PrimeInvestor. Use them before investing.
Rolling Returns and Market Conditions: A Reality Check
2025 hasn't been kind to equity funds. According to Outlook Money, category average returns for flexi-cap funds in 2025 were just 2.7%, while small-cap funds averaged negative 4.4%.
Does this mean these are bad funds? Not necessarily.
The same article shows that 5-year and 7-year rolling returns for many of these funds remain healthy at 12-15% annually. One poor year doesn't erase years of consistent performance.
This is exactly why rolling returns matter. They prevent panic-selling during temporary downturns and help you stay focused on long-term trends.
When Point-to-Point Returns Are Still Useful
Rolling returns aren't perfect. Here's when point-to-point returns still make sense:
1. Quick Comparisons: If you're screening 50 funds down to 10, point-to-point returns are a reasonable first filter.
2. Specific Goals: If you invested Rs 10 lakh exactly 5 years ago and want to know your actual return today, point-to-point return is the right answer.
3. Understanding Market Cycles: Comparing calendar year returns (2020 vs 2021 vs 2022) helps you understand how funds behaved during COVID, recovery, and correction phases.
4. Lump Sum Investments: If you made a single investment on a specific date, your actual experience is a point-to-point return.
The key is using both metrics appropriately, not replacing one entirely with the other.
Common Mistakes NRIs Make with Mutual Fund Returns
Mistake 1: Chasing Last Year's Top Performer
A fund showing 35% returns last year is tempting. But check its 5-year rolling returns. If the average is 12% with high variance, that 35% might be an outlier you can't expect to repeat.
Mistake 2: Ignoring Negative Rolling Returns
If a fund's 3-year rolling returns include periods of negative returns, that's important information. Some funds have never generated negative 5-year rolling returns in their history. That's the kind of consistency worth paying for.
Mistake 3: Not Adjusting for Risk
Two funds might have similar average rolling returns, but one achieves it with much higher volatility. Use the standard deviation of rolling returns (available on some platforms) to understand risk-adjusted performance.
Mistake 4: Using Too Short a Rolling Period
1-year rolling returns are too volatile for meaningful conclusions. They might show the fund had positive returns 90% of the time, but the 10% negative periods could be severe. Stick to 3-year minimum, 5-year ideally.
Mistake 5: Forgetting Survivorship Bias
Rolling return data only includes funds that still exist. Failed funds that were merged or closed don't appear in the data. This makes surviving funds look better than average.
What NRIs Should Actually Do
Based on everything above, here's a practical approach:
For Screening Funds:
- Start with point-to-point returns to create a shortlist
- Check 5-year rolling returns for your shortlisted funds
- Eliminate funds with high variance or frequent negative rolling return periods
- Compare remaining funds against their benchmark on rolling returns
For Monitoring Existing Investments:
- Don't panic if point-to-point returns look poor in a given year
- Check if rolling returns remain consistent
- Only consider switching if rolling returns show consistent deterioration over 2-3 years
For SIP Investments:
- Focus on 5-year and 7-year rolling returns
- Look for funds with high success rates (percentage of periods beating benchmark)
- Stay invested through market cycles; rolling returns prove consistency rewards patience
👉 Tip: At Belong, we help NRIs compare mutual fund options with data that goes beyond surface-level returns. Our GIFT City mutual funds offer NRIs additional tax advantages worth considering.
Rolling Returns for Different Fund Categories
Different fund categories have different expected rolling returns. Here's a general benchmark based on historical data:
Large-Cap Funds:
- Good 5-year average rolling return: 11-13%
- Expect lower variance than other categories
Mid-Cap Funds:
- Good 5-year average rolling return: 13-16%
- Higher variance; worst periods may show single-digit returns
Small-Cap Funds:
- Good 5-year average rolling return: 15-18%
- Highest variance; some 5-year periods may show negative returns
Flexi-Cap Funds:
- Good 5-year average rolling return: 12-14%
- Moderate variance; flexibility helps during downturns
Hybrid Funds:
- Good 5-year average rolling return: 9-12%
- Lowest variance; debt component provides stability
Use these benchmarks when evaluating funds. A large-cap fund with 8% average 5-year rolling returns is underperforming. A small-cap fund with the same 8% might be acceptable given the higher risk.
Tax Implications NRIs Should Remember
Whether returns are measured point-to-point or rolling, tax treatment depends on:
Equity Mutual Funds (65%+ in stocks):
- Held over 12 months: Long-term capital gains (LTCG) taxed at 12.5% on gains above Rs 1.25 lakh per year
- Held under 12 months: Short-term capital gains (STCG) taxed at 20%
Debt Mutual Funds:
- All gains taxed as per your income tax slab, regardless of holding period
GIFT City Mutual Funds:
- Tax-free for NRIs on capital gains
- No TDS deduction at source
- Fully repatriable without documentation hassles
For NRIs focused on tax efficiency, GIFT City investments through platforms like Belong offer significant advantages that improve your effective returns regardless of how you measure them.
How GIFT City Funds Change the Return Equation
Here's something worth considering: even if a regular mutual fund shows 12% returns, NRIs lose a portion to TDS and capital gains tax.
GIFT City mutual funds are structured differently:
- No capital gains tax for NRIs/OCIs
- No TDS on redemption
- Invest in USD, avoiding currency conversion losses
- Fully repatriable without Form 15CA/15CB
If a GIFT City fund delivers 11% and a regular fund delivers 12%, the GIFT City fund might actually give you better post-tax returns.
When comparing rolling returns across fund types, factor in these tax differences for an accurate comparison.
Explore options like the DSP Global Equity Fund or Tata India Dynamic Equity Fund available through GIFT City.
The Bottom Line: Which Metric Shows Real Performance?
Point-to-point returns tell you what happened once. Rolling returns tell you what typically happens.
For making investment decisions, rolling returns are more reliable because they:
- Remove timing bias
- Show consistency across market cycles
- Reveal worst-case scenarios
- Match how SIP investors actually experience returns
But use both metrics together. Point-to-point returns for quick screening, rolling returns for final decisions.
The best fund isn't the one with the highest returns on any given day. It's the one that consistently delivers good returns across many different days.
What to Do Next
Check the rolling returns of your current mutual fund holdings using free tools like Value Research or PrimeInvestor
Use Belong's NRI FD Comparison Tool to compare fixed-income alternatives with predictable returns
Explore GIFT City mutual funds for tax-efficient equity exposure
Join our WhatsApp community where NRIs discuss fund selection, rolling returns analysis, and investment strategies daily
Download the Belong app to access curated investment options designed specifically for NRIs
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