Benchmark

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?