InvestingBeginner
Benchmark
The index a portfolio is compared against to judge whether it performed well.
Detailed explanation
Every mutual fund declares a benchmark in its scheme document. Performance only means something relative to it: 14% in a year the benchmark returned 19% is underperformance, even though the absolute number looks good.
Example
A large-cap fund returning 16% against a NIFTY 50 TRI return of 18% has underperformed by 2 percentage points.
Why it matters
Without a benchmark, returns are just numbers — you cannot separate manager skill from a rising market.
Key points
- Compare against the Total Return version, which includes dividends.
- The benchmark must match the fund's mandate.
- Judge over full market cycles, not single years.
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.