A benchmark is a standard or reference point used to measure the performance of an investment, portfolio, or trading strategy. Common benchmarks include stock market indices like the S&P 500, the Dow Jones Industrial Average, or the FTSE 100. Fund managers and traders compare their returns against a benchmark to determine whether they are outperforming or underperforming the broader market.
Example
“The hedge fund returned 14% this year, beating its benchmark of the S&P 500 which gained only 10% over the same period.”