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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Performance

When comparing a scheme with a benchmark, a Total Return Index (TRI) is preferred over a price-return index because the TRI:

A TRI is preferred because it includes the reinvestment of dividends from index constituents, so it captures the total return. Scheme returns also reflect dividends, so a TRI gives a fair like-for-like comparison, whereas a price index ignores dividend income.

  1. AExcludes the effect of dividends so as to show only price movement
  2. BIncludes reinvestment of dividends from index constituents in the index valueCorrect
  3. CAdjusts the index value for the scheme's expense ratio
  4. DIs calculated only for debt benchmarks

Explanation

A TRI assumes that dividends paid by index constituents are reinvested, so it reflects the total return from the market. Scheme returns include dividends, so TRI gives a like-for-like comparison. A price index ignores dividends. TRI does not adjust for the scheme's expenses and is available for equity as well as other indices.

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