Sam: (scrolling through his mutual fund app) Ravi, I’m so confused! My fund shows three different types of returns — Absolute, XIRR, and Rolling. Aren’t they all the same thing?
Ravi: (laughs) Not quite, Sam. They all talk about returns, but each one tells a different story. Let’s start with something simple.
Sam: Okay, shoot.
Ravi: Imagine you invested ₹5,000 in a mutual fund back in 2015. Today, in 2025, that ₹5,000 has grown to ₹10,000.
Sam: Sweet! That’s a 100% return!
Ravi: Exactly — that’s called your Absolute Return. You simply look at how much your investment grew. Like – (10,000−5,000)/5,000=100%
But here’s the thing — it doesn’t care how long it took.
Sam: Ohh… so even if it took 10 years, it still says 100%?
Ravi: Yep. It’s like saying, “I lost 10 kilos!” but not mentioning it took 3 years. You made progress, sure, but without the time factor, it’s not the full picture.
Sam: Got it. So what’s XIRR then?
Ravi: Good question. Suppose instead of investing once, you put ₹5,000 every year for 10 years. That’s ₹50,000 total. By 2025, your investment grows to ₹85,000.
Sam: Okay, I’m following.
Ravi: Now, XIRR helps you figure out what your average yearly return was, considering all those investments made at different times. When you calculate it, you’ll get roughly 9.8% per year.
Sam: Oh, so XIRR shows how much I earned each year on average, even though I invested gradually?
Ravi: Exactly! Think of it like your fitness tracker. It doesn’t just tell you how much weight you lost, it tells you how consistently you’ve been working out every month.
Sam: That makes sense! Now, what on earth are Rolling Returns?
Ravi: Ah, that’s where most people scratch their heads. Rolling Returns tell you how consistently the fund has performed across time — not just in one lucky stretch.
Sam: Give me an example.
Ravi: Okay, instead of only checking how the fund did from 2015–2025, Rolling Returns look at every possible 10-year period — like 2010–2020, 2011–2021, 2012–2022, and so on.
Sam: Hmm… like checking multiple innings instead of just one match?
Ravi: Exactly! If the fund’s 10-year returns mostly stay between 8% and 11%, it’s a steady player — like Rahul Dravid. But if it swings between –2% and +18%, it’s more like a hit-or-miss player — exciting but unreliable.
Sam: So Rolling Returns show consistency over time, right?
Ravi: Bingo. It helps you see if the fund performs well most of the time, not just in one good decade.
Sam: Alright, then tell me this — which one should I actually use to judge my returns?
Ravi: Depends on what you’re asking. If you just invested once and want to see how much your money grew — Absolute Return is fine.
If you invest regularly, like through SIPs — XIRR gives a clearer picture of your yearly growth. And if you want to check whether the fund itself is reliable — go with Rolling Returns.
Sam: So basically — Absolute tells me how much I made, XIRR tells me how efficiently I made it, and Rolling Returns tell me how consistently the fund performs?
Ravi: Perfectly said!
Sam: (smiling) You make it sound so simple, Ravi. I used to think returns were just one number. Now I realize, they’re like three different camera angles of the same scene — each showing a unique perspective.
Ravi: (grinning) Exactly, my friend. The trick is to look at all three — and not just chase the number that looks the biggest.
Simplified Money Talks 