How is a total return index different from a normal index?
In a normal index, returns are calculated taking into account the change in the capital gain or loss. But the stocks held within an index also pay dividends. If all the dividends paid were to be reinvested, the returns you would get would be higher. The latter type of indices, which take into account dividend payouts, are called total return index.
What does this mean for you?
Every mutual fund needs to have a benchmark against which its performance has to be judged. And most funds use normal indices. Only a few have opted for the total return index as their benchmark. Quantum Mutual Fund’s Quantum Long Term Equity Fund is one example which uses the S&P BSE TRI-Sensex as its benchmark.
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