A standard reference point against which performance of an asset/ investment/ variable/ position/ instrument/ holding is measured or compared. Broadly speaking, a benchmark is a yardstick used for comparison.

For a portfolio, benchmark is a standard measure that establishes a minimal or optimal level against which the allocation, risk, and return of a given portfolio is analyzed or evaluated. A benchmark is a baseline, that is used for comparative purposes when evaluating the performance of a portfolio, collection of assets (baskets), mutual funds or broadly an investment.

In financial markets, indexes are benchmarks to which the performance of individual securities is related. In addition to benchmarks representing broad market or specific sector characteristics, such as large-cap index, mid-cap index, small-cap index, growth, and value, market participants usually resort to indexes based on fundamental characteristics, industry, sectors, market trends, earnings and dividends, etc.

In short, a benchmark may take multiple forms including: published interest rates, indexes (for equity markets and bond markets), published spot and forward prices of specific assets (e.g., commodities), etc.