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. 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 >>
  2. 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 >>
  3. How is portfolio variance reduced in Modern Portfolio Theory?

    Learn about modern portfolio theory, specifically what it asserts about asset allocation and managing portfolio risk through ... Read Answer >>
Related Articles
  1. Financial Advisor

    The Workings Of Equity Portfolio Management

    Achieve analytical efficiency by applying your evaluation to a key set of stocks.
  2. 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.
  3. Managing Wealth

    Is Your Portfolio Beating Its Benchmark?

    Compare portfolio manager performance using the information ratio.
  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. 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.
  6. 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.
  7. 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.
  8. Investing

    Understanding Portfolio Investment

    Portfolio investment involves buying securities with the expectation of earning a return on them.
  9. Financial Advisor

    5 Popular Portfolio Types

    Learning how to build these portfolios will increase your investing confidence and give you financial control.
RELATED TERMS
  1. Trading Effect

    A measure of performance that examines the difference in returns ...
  2. Active Return

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

    Portfolio Management is the art and science of making decisions ...
  4. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment ...
  5. Outperform

    An analyst recommendation meaning a stock is expected to do slightly ...
  6. Modern Portfolio Theory - MPT

    A theory on how risk-averse investors can construct portfolios ...
Hot Definitions
  1. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
  2. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. Backward Integration

    A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
  5. Pari-passu

    A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations ...
  6. Interest Rate Swap

    An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for ...
Trading Center