What is benchmark of mutual funds

Mutual fund benchmarks does not affect the mutual fund schemes or its performances.

A mutual fund benchmark is a standard against which the performance of a mutual fund scheme can be measured. Since 2012, SEBI made it mandatory for fund houses (AMCs) to declare a benchmark index for each of the schemes managed by them. This benchmark is independent and is based on the objectives of your fund.

If the mutual fund scheme in which you have invested,delivers higher returns than the benchmark returns, it is said to have outperformed and vice-versa. On the other hand, if the benchmark returns falls over a period of time but your fund's NAV falls lesser (in percentage terms), you can still say that your fund have outperformed the benchmark. But in case your fund could not match or delivers less than than the benchmark returns in a given period, it is said to have under-performed in that period.

Therefore, in conclusion we can say that the benchmark is a barometer to judge and compare mutual fund returns.

You may see here what are the benchmarks used by various fund categories and how they have performed over a period of time - https://www.advisorkhoj.com/mutual-funds...

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