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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
A standard to compare your investments against, like the S&P 500.
Why It Matters
A benchmark answers 'compared to what?' If your portfolio returned 8%, is that good or bad? If the S&P 500 returned 15%, you underperformed. If it returned 5%, you outperformed. Choosing the right benchmark matters - comparing a bond fund to the S&P 500 isn't fair. Every fund has a benchmark; know what yours is.
Key Points
- Common benchmarks: S&P 500 (US large cap), Russell 2000 (small cap), MSCI EAFE (international)
- Your benchmark should match your investment style - compare apples to apples
- Beating your benchmark after fees is how you measure if active management is worth it
Related Terms
Common Questions
A standard to compare your investments against, like the S&P 500. A benchmark answers 'compared to what?' If your portfolio returned 8%, is that good or bad? If the S&P 500 returned 15%, you underperformed. If it returned 5%, you outperformed.
A benchmark answers 'compared to what?' If your portfolio returned 8%, is that good or bad? If the S&P 500 returned 15%, you underperformed. If it returned 5%, you outperformed. Choosing the right benchmark matters - comparing a bond fund to the S&P 500 isn't fair. Every fund has a benchmark; know what yours is.
Common benchmarks: S&P 500 (US large cap), Russell 2000 (small cap), MSCI EAFE (international)
Your benchmark should match your investment style - compare apples to apples
Beating your benchmark after fees is how you measure if active management is worth it