Benchmark

AAA

DEFINITION of 'Benchmark'

A standard against which the performance of a security, mutual fund or investment manager can be measured. Generally, broad market and market-segment stock and bond indexes are used for this purpose.

VIDEO

Loading the player...

BREAKING DOWN 'Benchmark'

When evaluating the performance of any investment, it's important to compare it against an appropriate benchmark. In the financial field, there are dozens of indexes that analysts use to gauge the performance of any given investment including the S&P 500, the Dow Jones Industrial Average, the Russell 2000 Index and even competitor fund.

RELATED TERMS
  1. Passive Management

    A style of management associated with mutual and exchange-traded ...
  2. Index Hugger

    A managed mutual fund that tends to perform much like a benchmark ...
  3. Benchmark Bond

    A bond that provides a standard against which the performance ...
  4. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's ...
  5. Index Fund

    A type of mutual fund with a portfolio constructed to match or ...
  6. Wilshire 5000 Total Market Index ...

    A market capitalization-weighted index composed of more than ...
Related Articles
  1. Mutual Funds & ETFs

    3 Mutual Funds that Hold Google Stock

    Discover the top three mutual funds that dedicate the largest percentage of their total assets to Google, Inc. stock.
  2. Mutual Funds & ETFs

    ETF Analysis: Schwab US Large-Cap

    Discover how the Schwab U.S. Large-Cap exchange-traded fund is managed, the index it tracks and the investors for which it is most appropriate.
  3. Mutual Funds & ETFs

    ETF Analysis: Utilities Select Sector SPDR

    Learn about the Utilities Select Sector SPDR ETF and the benchmark index it tracks, and understand what type of investors may be interested in the fund.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Trust - iShares PHLX Semiconductor

    Learn about the Shares PHLX Semiconductor ETF, its holdings, and its suitability for certain types of investors, because it is a volatile fund.
  5. Mutual Funds & ETFs

    ETF Analysis: Vanguard Health Care

    Learn about the Vanguard Health Care ETF, its holdings and how it may be appropriate for a growth-oriented investor who wants to invest in the sector.
  6. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Biotech

    Discover the investment management style of SPDR S&P Biotech ETF, and learn which investors can benefit from the fund's focused biotech holdings.
  7. Mutual Funds & ETFs

    ETF Analysis: Health Care Select Sector SPDR

    Learn about the Health Care Select Sector SPDR Fund including its performance, current holdings, recent performance and the outlook for the ETF.
  8. Investing Basics

    What's a Benchmark?

    A benchmark is a standard investors choose to gauge the performance of their portfolios.
  9. Bonds & Fixed Income

    Is Your Portfolio Beating Its Benchmark?

    Compare portfolio manager performance using the information ratio.
  10. Investing Basics

    An Introduction To Stock Market Indexes

    Investopedia explains the five most talked about indexes and what makes them all different.
RELATED FAQS
  1. What are the main benchmarks that track the telecommunications sector?

    Performance measuring and benchmarking are constantly changing in the telecommunications sector because of the evolving dynamics ... Read Full Answer >>
  2. What are the most important equity market indexes?

    The most important equity market indexes are the S&P 500, Nasdaq Composite and Russell 2000. These indexes in total provide ... Read Full Answer >>
  3. What are the main benchmarks that track the performance of the Internet sector?

    The main benchmarks that track the performance of the Internet sector are the Nasdaq Composite Index, the First Trust Dow ... Read Full Answer >>
  4. What are the primary benchmarks that track the electronics sector?

    Some of the main benchmarks that track the electronics sector are the book-to-bill ratio, cash flow-to-debt ratio, debt-to-capital ... Read Full Answer >>
  5. What are most popular benchmarks that track the chemicals sector?

    The most popular benchmarks that track the chemicals sector are the Dow Jones U.S. Chemicals Index, the Dow Jones Industrial ... Read Full Answer >>
  6. What are the main benchmarks for tracking the performance of the metals and mining ...

    Benchmarks serve as initial points of reference against which portfolios, individual stocks or stock sectors can be compared ... Read Full Answer >>
  7. What are the main benchmarks that track the performance of the financial services ...

    The number of possible benchmarks that investors or analysts can choose from is extensive, especially for a sector as large ... Read Full Answer >>
  8. Who determines the LIBOR rate?

    The LIBOR rate, or London Interbank Offered Rate, is a benchmark rate at which individual contributor panel banks can borrow ... Read Full Answer >>
  9. What are the most common ETFs that track the financial services sector?

    The Standard & Poor's Depositary Receipt (SPDR) Financial Select Sector Fund (XLF) has net assets of $17.73 billion and ... Read Full Answer >>
  10. What are the most common ETFs that track the forest products sector?

    There are two common exchange traded funds (ETFs) that track the forest products sector: the Guggenheim Timber ETF (CUT) ... Read Full Answer >>
  11. How do you calculate r-squared in Excel?

    R-squared is a statistical relationship between two series of events. It is also a risk measure that is used in economics ... Read Full Answer >>
  12. What does a mutual fund's beta coefficient measure?

      Evaluating a mutual fund involves comparing returns, expenses and risk profiles with other funds. It can be quite simple ... Read Full Answer >>
  13. Is tracking error a significant measure for determining ex-post risk?

    Before we answer your question, let's first define tracking error and ex-post risk. Tracking error refers to the amount by ... Read Full Answer >>
  14. 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 Full Answer >>
  15. What does it mean when people say they "beat the market"? How do they know they have ...

    "Beating the market" is a difficult phrase to analyze. It can be used to refer to two different situations: 1. An investor, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!