Indexes and Benchmarks
Benchmark
A standard used to compare the performance of an investment, portfolio, or fund.
Also called: performance benchmark
What it means
A benchmark is a reference point used to judge how an investment performed. For example, if a fund invests mostly in large U.S. stocks, the S&P 500 may be used as its benchmark. A benchmark is not always perfect, but it gives context to returns.
Why it matters
Without a benchmark, it is hard to know whether performance was strong, weak, or simply average for that type of investment.