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Benchmark
Definition
A standard index used to measure and compare investment performance.
Explanation
Common benchmarks include the S&P 500 (U.S. large-cap stocks) and Bloomberg Aggregate Bond Index. Your investment returns are compared to its benchmark to assess performance. Most active funds fail to beat their benchmark over 5+ years.
A good benchmark should match your investment's asset class and strategy.
Example
Your portfolio returned 8% last year. The S&P 500 returned 10%. You underperformed by 2%.