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Financial Benchmarking Definition – Wealthspire

What is a benchmark in finance?

Financial benchmarking involves running financial analysis to compare business practices and standards of one firm to those of other firms within the same industry.

A benchmark is a standard, or baseline, used for comparison purposes when assessing a portfolio or mutual fund.

What is the benchmark in the portfolio?

Benchmarks are used to analyze and manage the allocation, risk and given returns of a portfolio. They can also be used to assess how a portfolio is performing against different market sectors. To track the performance of an asset group, companies use an index such as the S&P 500, which is broad and captures the entire market, or a more specific index that tracks a specific industry.

What are the Types of Financial Benchmarking?

There are two different types of financial benchmarking – internal and external. Internal benchmarking compares the performance of different stocks within the same portfolio, while external benchmarking compares the overall portfolio performance to other portfolios that are either in the same industry or in different industries.

Wealthspire Advisors is a registered investment advisory and subsidiary of NFP Corp.
This information should not be treated as a recommendation to buy, offer to sell, or solicit an offer to buy a particular security or investment strategy. Comment provided is for informational purposes only and should not be relied upon for accounting, legal or tax advice. While the information is believed to be reliable, Wealthspire Advisors cannot guarantee its accuracy, completeness or suitability for any purpose, and makes no warranties with respect to the results obtained from its use. ©2011 Wealthspire Advisors.

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