Benchmark
A standard index or rate used to evaluate investment performance — the S&P 500 is the most common equity benchmark.
A benchmark is a reference point used to measure investment performance. Without a benchmark, you cannot know whether your returns are good or bad relative to what the market offered.
Common benchmarks: the S&P 500 for US large-cap equities, the Bloomberg US Aggregate Bond Index for fixed income, and the MSCI World for global equities. Choosing the right benchmark matters — a US small-cap fund should not be benchmarked against the S&P 500.
Alpha is the excess return above the benchmark. Beta measures sensitivity to the benchmark's moves. A fund with consistent positive alpha is genuinely adding value beyond market exposure.
Related Terms
Asset Allocation
How you divide your portfolio across asset classes — stocks, bonds, cash, alternatives — to balance risk and return.
BeginnerIndex
A benchmark measuring the performance of a selected group of securities — the S&P 500 tracks 500 large US companies.
BeginnerPortfolio
The complete collection of investments you hold — stocks, bonds, cash, and other assets together.
BeginnerPosition Trading
Holding trades for weeks to months based on longer-term trends. Lower frequency, bigger targets, less screen time.
IntermediateReturn on Investment (ROI)
Net profit as a percentage of the capital invested. The universal yardstick for comparing investment performance.
BeginnerYield
The income generated by an investment expressed as a percentage of its price. Used for bonds, dividends, and savings.
Beginner