Measuring Yourself Against a Benchmark

A benchmark tells you whether your choices are adding value or whether a simple index fund would have done better. Here is how to pick one and compare fairly.

Why compare at all

A 12% gain feels great, until you learn a plain index fund made 20% in the same period with less risk. A benchmark is a simple, low-cost alternative you could have owned instead. Comparing against it answers the real question: is all my effort paying off?

Unlock all of Investing School

The rest of this lesson, its chart examples and quiz are part of Investing School. Start free with Stock Market Fundamentals and the first lesson in every category.