Rolling Period Returns (2024)

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An interesting (and better) way to look at return and risk combined is by seeing how an asset category fared over a number of rolling periods. A rolling period includes two or more continuous years and all such periods over the time frame selected. As an example, over any given 10 years, there are eight 3-year rolling periods (1986–1988, 1987–1989, 1988–1990, 1989–1991, etc.). The advantage of using rolling periods is bad returns cannot be hidden as easily. Rolling periods provide an “apples to apples” form of comparison.

Listed below are all 5-year rolling periods over 37 years (1980–2016). Over 37 years, there are 33, 5-year rolling periods. The table shows how often different investment categories enjoyed positive returns, looking at all 5-year periods.

Percentage of Time Positive Returns

All 5-Year Rolling Periods [1980–2016]

Category	# of positive periods	% of the time
Large cap stocks	28 out of 33	85%
Small cap stocks	29 out of 33	88%
REITs	31 out of 33	94%
Long-term gov’t bonds	33 out of 33	100%
Med-term gov’t bonds	33 out of 33	100%
T-bills	33 out of 33	100%

The huge equity market losses in 2008 reduced the number of positive 1- and 5-year periods for stocks and REITs. The table below shows the number of positive periods, assuming holding period was just 1 year.

Percentage of Time Positive Annual Returns [1980–2016]

Category	# of positive periods	% of the time
Large cap stocks	30 out of 37 years	81%
Small cap stocks	31 out of 37 years	84%
REITs	32 out of 37 years	86%
Long-term gov’t bonds	30 out of 37 years	81%
Med-term gov’t bonds	33 out of 37 years	89%
T-bills	37 out of 37 years	100%

Even for investors who are not patient, the odds of making money in any one of the six categories listed above are quite high, assuming a holding period of just one calendar year.