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M* JR on Rolling Returns

yogibearbullyogibearbull
in Other Investing
M* JR compares rolling returns (5- , 10-, 20- yr) and annual returns for 01/1926-09/2023. An obvious conclusion is that longer rolling-return periods smooth the returns and reveal the underlying trends. Historical data (for almost 97 years!) are also notable.
At one time, M* Charts used to provide rolling return option. May be that should be restored.
https://www.morningstar.com/stocks/how-time-horizon-affects-odds-equity-investing

Comments

  • Sven
    The 20 year period data is more meaningful since it over several economic cycles. One can see the ups and downs and the overall effect on the asset class returns.

    Shorter time frame of 1, 3 and 5 year returns tend to be less reliable in my honest opinion. Several variables were not discussed including asset class correlation, interest rates, currencies, sub-categories within an asset class, plus other macro factors.

    Bonds are a good example in this year. There are those that done well while others lag the broader total bond index. US stock is another example of how to reconcile the “magnificent seven” tech stock’s contribution to S&P 500 while the 493 stocks in the index are essentially flat.
  • yogibearbullyogibearbull
    The average business cycle is about 4 years; not strangely, the US Presidential cycle is also similar. So, I like to look at 3- or 5- year rolling returns, where available.

    Portfolio Visualizer has a Rolling Return tab that has built-in 3- and 5- year Rolling Returns. It isn't customizable.

    StockCharts can be fooled into providing Rolling Returns using the ROC (n) feature. It gives %change over n periods, so, in Daily charts, use 780 days for 3-yr and 1,300 for 5-yr.
  • Sven
    Thanks @yogibb. I too use Portfolio Visualizer, but not as much with StockCharts. M* used to be pretty useful but its capabilities have diminished considerably. Not paying them anywhere.
  • yogibearbullyogibearbull
    Re StockCharts Rolling Returns with ROC(n), the free version has a limit of n = 600. So, in Daily display, that is 2.31 yrs max and in Weekly display, 11.53 yrs max.

    So, one should switch to Weekly display and use n = 156 for 3 yrs, 260 for 5 yrs, 520 for 10 yrs.
  • dtconroe
    At age 75, longer term rolling returns is not that meaningful to me personally. My focus has become more short term, and it appears to me, that we are transitioning away from the lengthy bull market that started in the early 2000s. Low interest rates, and government stimulation, were major factors in the stock market for "about" the last 20 years. What will drive the market in the next 20 years is a mystery to me, but it is highly unlikely that I will be around long enough to see if those charts are anything like the past 20 years.
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