An investment benchmark is a standard against which you can measure the performance of an individual security or group of securities. For example, the average annual performance of a category of investments is a benchmark against which the current performance of that same category, as well as its individual members, may be compared. For example, the average annual return on U.S. Treasury bills, representing cash investments, has been 3.7% since 1925.
Among the most widely followed benchmarks in the United States are the Standard & Poor's 500 Index (
Another significant benchmark is the 10-year Treasury bond, which is used to gauge investor sentiment. Lower yields indicate that more consumers are investing in the bond market, driving bond prices up. Higher yields tend to indicate more consumers are investing elsewhere, as decreasing demand leads to lower bond prices. You might think of prices and yields like a teeter-totter - when bond prices go down, yields rise and when prices go up, yields fall.