A standard index or reference portfolio used to evaluate investment performance — the S&P 500 is the most common equity benchmark in the US.
Deeper Explanation
Benchmarking is both useful and dangerous. Used correctly, it reveals whether active management is adding value net of fees over the long term. Used incorrectly, it creates career risk for professional managers who underperform in the short term and incentivises closet indexing — holding a portfolio nearly identical to the benchmark to avoid underperformance. Buffett's benchmark for Berkshire has always been the S&P 500 total return — and he has instructed trustees to put his wife's inheritance into a low-cost S&P 500 index fund on his death, the highest-possible endorsement of passive investing for most investors.
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