Benchmark

A return means very little on its own. Eight percent in a year when everything rose twenty is a different result from eight percent in a year when everything fell, and the number is identical in both. A benchmark supplies the missing half of that sentence by giving something to compare against.

The comparison only works when the two things do the same job. A fund holding large US companies is normally measured against an index of large US companies, because measuring it against a bond index or a technology-only index compares two different mandates and produces a figure about nothing.

Fund documents state which benchmark they use, and that choice is worth reading rather than assuming. A fund built to track its benchmark and a fund built to beat it are two different products with two different fee structures, and the benchmark named is what tells you which one you are looking at.