What Is a Benchmark? Definition, Types, How to Use Them

A benchmark is a standard used for comparison and assessment. Benchmarks help investors evaluate a security's performance and risk profile. Below, you'll learn more about investing benchmarks, meet a few common ones, and discover how to use them to improve your investing strategy.

Loading paragraph...

Keyboard with keys rearranged to spell Standard. — Image source: Getty Images.

Loading image...

Loading paragraph...

Exchange-Traded Fund (ETF)

An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once.

Loading definition...

Loading paragraph...

Loading pitch...

Loading paragraph...

Loading pitch...

Loading paragraph...

How to Calculate Volatility of a Stock

Stocks always go up and down. How do you calculate volatility to maximize returns?

The Value Investing Strategy

Find out what value investing is and how to find value stocks that are poised to deliver shareholder gains over time.

How to Calculate Return on Indices in a Stock Market

Knowing how an index is performing can give you an idea of how the market and your portfolio are doing relative to the index.

5 Things to Know About Asset Allocation

Smart investors adjust their asset mix as they grow older.

Loading hub_pages...

Over the past decade, the fund has returned an average of 4.25% annually. The benchmark return is slightly higher at 4.54%. A small underperformance to the benchmark is typical for funds. Funds, unlike indexes, have fees and timing issues related to trades.

Since the fund's inception in 1994, it has had the same average annual return as the index: 6.17%. The fund's 4% to 6% return over time is modest relative to an all-stock benchmark like the S&P 500. This is what you'd expect from a conservative fund. If you wanted higher returns, you'd seek out a fund with more exposure to stocks than bonds.

Loading paragraph...

Loading pitch...

About the Author

Catherine grew up in Southern California wearing a lot of black and trying to perfect the art of sarcasm. Prior to joining The Fool as a contract writer, Catherine was climbing the corporate ladder in marketing roles and dabbling in too many side hustles. When she's not writing, she can be found riding a horse in the country or shopping online for clothes.

XMFCatherineJB

@catherinejbrock

Catherine Brock has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.