Steady-Eddie or Roller Coaster?

Rolling returns offer a useful lens into a fund's fuller return history and can help investors see through the haze caused by the latest data. By looking at rolling returns, investors can gain a full appreciation for how a fund's returns stacked up at any point in time, not just through the latest month or quarter-end. For example, a fund's current trailing three-year return spans from October 2008 through the end of September 2011--just one discrete period that includes some of the worst months ever for stocks. With rolling returns, however, an investor can look back 10 years or longer to see how a particular fund stacked up in every three-year period throughout its relevant history, encompassing a wider range of market types.

Judged through the rolling lens, some funds that currently appear at the top of their game look less noteworthy: Over time, they've had trouble sustaining an advantage. Meanwhile, others that wouldn't otherwise stand out are revealed as amazingly consistent. T. Rowe Price, for example, has plenty of funds that are consistently strong and steady, though not typically chart toppers over shorter stretches. Many of the firm's funds are able to lock in top quartile long-term results not by beating their peers by large margins over short stretches, but by keeping ahead consistently while more inconsistent rivals pop in and drop out of the rankings.