8.38What is benchmark comparison?
1What is it?
Each fund names a benchmark index (e.g. Nifty 100 TRI for large caps). Compare the fund’s returns with it.
2Why does it exist?
If an active fund can’t beat its benchmark over 5+ years after fees, a cheaper index fund may be better. TRI (Total Return Index) includes dividends, which makes for a fair comparison.
3Quick revision
- Compare with benchmark TRI.
- Consistent underperformance → consider an index fund.
4Knowledge check
Q1. What is TRI?Show answer
Total Return Index: index returns including dividends.
Q2. Why compare with TRI not price index?Show answer
Funds receive dividends too.
Q3. Active fund trails benchmark 5 years. Option?Show answer
Consider a low-cost index fund.