Everything is relative. Ask Einstein. Ask David Hume and Franz Boas. Or just ask your investment advisor.
A benchmark is a way to measure performance. In finance terms, your investment manager will track how they did managing your money against some benchmark. The most common example would be the S&P 500.
So say your portfolio lost 2% during a year, but the S&P 500 lost 10%. Your investment advisor would claim they did a good job. Stocks in general were down, and they did significantly better than the overall market, saving you from losing more money.
However, if the S&P 500 rose 10% for the year and you only gained 8%, it might be time to give your advisor a huffy call. Sure, you made 8%, but you could have made 10% by just buying a vanilla S&P 500 index fund. What are you paying them for?
And what is that mark in the bench anyway? Can everyone please start cleaning their scuffs?
Related or Semi-related Video
![Finance: What is Relative Return?](https://media1.shmoop.com/video/thumbnails/COURSE.FINANCE.1230_770x433.jpg)
Finance: What is Relative Return?10 Views
Up Next
What is the Relative Strength Index? The Relative Strength Index is a technical analysis indicator that measures trading direction trends over the...
What is the difference between mutual funds and index funds? Mutual funds are professionally managed. Those investors trade shares and realize taxa...
How do you judge the performance of an index fund? For index funds, they're really just a reflection of the stocks and bonds they, uh... reflect. S...