CAGR is point-to-point - one start date, one end date, one number - and that makes it fragile. There is no averaging inside it. Shift the start date by a week, especially around a market event, and a fund's 1-year CAGR can swing from 14% to 11% on the same end date. For short windows (1-2 years) your entire read of a fund can depend on whether the start happened to land on a good or bad day, and when you compare two funds both numbers are hostage to that calendar luck.
Rolling returns fix it by changing the question from "what happened between these two dates" to "what does a typical holding period look like across the fund's whole history." You take every trading day as an end date, look back a fixed window (say 1 year), and compute that window's CAGR - producing thousands of observations (a 7-year fund gives ~1,500-1,700 one-year CAGRs). Then you summarize: average, median, worst, best, and % of windows that were negative. No single date can distort it. Two time spans matter: the rolling window (the holding period simulated) and the evaluation period (the total history it runs over, which must be meaningfully longer).
See it live on mutual funds (rolling returns with average/median/worst and % negative): https://www.tigzig.com/mfpro. Concept write-up with formulas: https://www.tigzig.com/post/rolling-returns-why-cagr-alone-can-mislead-you. Related: free tool to compare Indian mutual funds https://www.tigzig.com/agents-faq/free-tool-to-compare-indian-mutual-funds.
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