Every Monday, cricket explains one investing concept.
Imagine the strangest cricket match ever.
Team India vs Mumbai Indians.
Yes.
India vs an IPL team.
It sounds ridiculous.
But look at the team sheets.
Rohit Sharma.
Hardik Pandya.
Suryakumar Yadav.
Tilak Varma.
Jasprit Bumrah.
These players have represented India and are also part of Mumbai Indians' current squad. (Mumbai Indians)
So let's make this imaginary match even more interesting.
India bats first.
And let's say India scores:
251.
Now Mumbai Indians come out to chase.
But there's a rule.
The players common to both teams score exactly the same runs in both innings.
So if Rohit scored 60 for India...
he scores 60 for Mumbai Indians too.
If Bumrah takes 2 wickets for India...
he takes the same 2 for Mumbai Indians.
The common players cancel each other out.
So where can the difference come from?
The players who are different.
And suddenly...
this ridiculous match starts making sense.
Think about what we just did.
We created a reference team — Team India.
Then we created another team — Mumbai Indians.
We kept the common players exactly the same.
Now the only thing that can make Mumbai Indians finish above or below India...
is what their different players do.
That's a surprisingly useful way to think about investing.
Because a mutual fund also needs something to compare itself against.
That reference is called a benchmark.
Think of the benchmark as Team India.
And think of the mutual fund as Mumbai Indians.
If Team India sets the reference...
and the fund performs better than that reference...
the fund has beaten its benchmark.
If it performs below it...
it has fallen behind.
The same idea works with returns.
Suppose our imaginary Team India scores 251.
Mumbai Indians' common players contribute exactly the same runs.
But their different players score another 15 runs.
Mumbai Indians finish at:
266.
India: 251
Mumbai Indians: 266
Mumbai Indians have beaten the benchmark.
Now reverse it.
Their different players score only 5 runs.
Mumbai Indians finish at:
256?
No.
Remember — the common players already matched India's contribution.
So the only difference comes from those different players.
That's the point.
The benchmark gives us the reference.
The fund's difference from that reference tells us whether it performed better or worse.
And now you can see why simply saying:
“My fund returned 12%.”
doesn't tell you the complete story.
You need another number beside it.
What did its benchmark do?
Because just like cricket...
you can't understand the score without knowing who you're playing against.
🏏 The 12th Man's Take
The benchmark is the team you measure your performance against.
🎙️ Next Monday...
Now here's where this match gets really strange.
Imagine Mumbai Indians' team sheet...
and Team India's team sheet...
start looking almost identical.
Seven players.
Eight players.
Maybe even more.
At some point, you have to ask:
“Is this team actually playing its own game?”
💬 Over to the Dressing Room...
Here's your 12th Man challenge.
Pick one mutual fund you own.
Don't look only at its return.
Find its benchmark.
Then ask:
“How did my team perform against the team it is being compared with?”
And if you find something interesting...
bring it to the Dressing Room.
That's what we're building here.
Not a room where someone tells you what to buy.
A room where 12th Men look at their own teams, compare notes, ask questions and discover what is actually happening inside their portfolios.
You can explore your own mutual fund analysis on Gajamudra completely free.
The community is free too.
No hidden charges.
So don't just watch the match.
Check your own team.
Beyond Returns.
Understand What You Own.
🏏 Previous Episodes
Episode 001 — Before The First Ball
Read Episode 001
Episode 002 — The Selection Room
Read Episode 002
Episode 003 — The Bigger Stadium
Read Episode 003
Episode 004 — The Scoreboard
Read Episode 004
FAQs
1. What is a benchmark in mutual funds?
A benchmark is a reference used to compare the performance of a mutual fund. In The 12th Man, think of it as Team India setting the score that another team has to chase.
2. Why do mutual funds have benchmarks?
A fund's return by itself doesn't tell the complete story. The benchmark helps you understand whether the fund performed better or worse than its relevant reference.
3. How does a benchmark work?
If the benchmark returns 10% and a mutual fund returns 12%, the fund has performed 2 percentage points above the benchmark. If the fund returns 8%, it has fallen below it.
4. Is a higher mutual fund return always better?
Not necessarily. You need context. A 12% return may look good until you discover that the fund's benchmark returned 15%.
5. What is the cricket analogy for a mutual fund benchmark?
Think of Team India as the reference team and an IPL team as the mutual fund. The performance of the IPL team is compared with the standard set by Team India.
6. Why is comparing a fund with its benchmark useful?
It gives investors context. Instead of asking only, “How much did my fund make?”, you can also ask, “How did it perform compared with its benchmark?”
7. What happens if a mutual fund beats its benchmark?
It means the fund delivered a higher return than its benchmark for the period being compared.
8. What happens if a mutual fund underperforms its benchmark?
It means the fund delivered a lower return than its benchmark for that period.
9. Does beating the benchmark guarantee that a mutual fund is good?
No. Benchmark comparison is useful, but it is only one part of understanding a fund. It should not be treated as a standalone investment recommendation.
10. Is the benchmark the same as another mutual fund?
No. A benchmark is generally an index or other defined reference used for comparison. Another mutual fund may have a completely different portfolio and objective.
11. Can different mutual funds have different benchmarks?
Yes. Different funds can use different benchmarks depending on their investment strategy and category.
12. What is the difference between a fund's return and its benchmark return?
The fund's return tells you how the fund performed. The benchmark return gives you a reference for comparison.
13. Why shouldn't investors look at mutual fund returns in isolation?
Because the same return can tell very different stories depending on what the relevant benchmark achieved.
14. Where can I find the benchmark of my mutual fund?
You can generally find the benchmark in the fund's official documents and scheme information. Gajamudra can also help you explore and analyse your mutual fund portfolio.
15. Does Gajamudra recommend which mutual fund to buy?
No. Gajamudra is designed to help investors understand what they already own, rather than tell them what they should buy.
16. Can I analyse my mutual funds on Gajamudra for free?
Yes. Gajamudra's analytics can be explored completely free, and joining the Gajamudra community is also free, with no hidden charges.
17. What should I check after seeing my mutual fund's return?
Ask one simple question:
“What did my benchmark do?”
That's the beginning of understanding the score rather than simply looking at the number.
18. What does Episode 005 of The 12th Man teach about investing?
A score means more when you know who you're playing against. In investing, the benchmark provides that reference point.