A benchmark portfolio is a portfolio in which the asset mix attempts to duplicate the investment performance of a broadly diversified index (i.e. S&P 500). They are only meant to match the performance of the corresponding index, not beat it.
Why It's Important
When you were in school, didn't you have benchmark exams and tests? What were they used for? Typically, they are used to see how you are performing against the "norm". That is exactly what a benchmark portfolio is for! You use a benchmark to make sure your portfolio is performing adequately and make adjustments as needed.
My benchmark portfolio is 90/10 (90% stocks/10% bonds). That is what works for my goals, risk tolerance, and time horizon. When you are doing your research into what you want to invest in (because you should), make sure you match it up against a benchmark to make sure it is at least performing at that level or, preferably, better.
*This is not investment advice and is only provided for educational purposes*
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