A:

The BEST definition of a benchmark portfolio is:
a) A preset list of securities to be used to compare the performance of an actual portfolio

b) A model portfolio with the same asset allocation percentages of the actual portfolio

c) The portfolio that the IA must attempt to outperform with an actual portfolio

d) An index such as the Standard & Poor's 500

The correct answer is "a." While all of the choices could be considered definitions of a benchmark portfolio, the best definition is the specific list of securities that will be compared with the performance of the actual portfolio.

RELATED FAQS
  1. What should I use as a benchmark for my small-cap stock portfolio?

    When creating a stock portfolio, it is important to have a benchmark against which you can compare your returns. Comparing ... Read Answer >>
  2. The primary reason for an IA to rebalance a client’s portfolio is to:

    A. ensure the portfolio matches the asset allocation chosen for the client's risk tolerance and objectives. B. increase portfolio ... Read Answer >>
  3. How does being overweight in a particular sector increase risk to a portfolio?

    Learn about the risks of having a portfolio that is overweight in a particular sector and how investors should regularly ... Read Answer >>
  4. How do I calculate the percentage gain or loss for my portfolio when all of the stocks ...

    Finding the total percentage gain or loss on a portfolio requires a few simple calculations. First, you should understand ... Read Answer >>
Related Articles
  1. Managing Wealth

    Avoid Future Shock By Protecting Your Portfolio With Futures

    Worried about protecting your portfolio of diversified stocks and assets? Using futures with correct strategies can help.
  2. Managing Wealth

    Is Your Portfolio Beating Its Benchmark?

    Compare portfolio manager performance using the information ratio.
  3. Financial Advisor

    Preparing For a Career as a Portfolio Manager

    Find out what it takes to win a spot in one of the most coveted financial careers.
  4. Personal Finance

    Portfolio Manager: Job Description & Average Salary

    Discover the duties and responsibilities of a portfolio manager, along with education, training and skills requirements, and salary expectations.
  5. Investing

    How to Use a Benchmark to Evaluate a Portfolio

    What is an investment benchmark and how is it used to evaluate the risk and return in a portfolio.
  6. Personal Finance

    What Exactly Does A Portfolio Analyst Do?

    Portfolio analysts have the exciting role of working between the investment team layers and they touch various aspects of an investment organization.
  7. Investing

    A Guide To Core-Satellite Investing

    Find out how this approach reduces risk and costs so you can maximize your portfolio's return.
  8. Investing

    In Praise Of Portfolio Simplicity

    Find out how you can streamline your investments for greater returns.
  9. Investing

    Rebalance Your Portfolio to Stay on Track

    Like a tune-up for a car, this re-alignment should minimize trouble down the road.
RELATED TERMS
  1. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  2. Active Return

    The percentage gain or loss of an investment relative to the ...
  3. Portfolio Return

    The monetary return experienced by a holder of a portfolio. Portfolio ...
  4. Market Portfolio

    A theoretical bundle of investments that includes every type ...
  5. Portfolio Management

    Portfolio Management is the art and science of making decisions ...
  6. Modern Portfolio Theory - MPT

    A theory on how risk-averse investors can construct portfolios ...
Hot Definitions
  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  2. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  3. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  4. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  5. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center