TOP CONTRIBUTORS

Charles Armstrong

The Daily Angle

The term Market Perform refers to investments that have seen equivalent returns compared to the market in general. In reference to stocks, market performance is typically gauged by a benchmark index, such as the S&P 500 (.SPX-E) or the Dow Jones Industrial Average (.DJIA). Investments that see better or worse returns than the market in general are said to out perform or under perform the market, respectively.

Examples

• A man buys shares in an index fund that tracks the S&P500. At the end of a given year his investment has appreciated identically to the index. As the S&P is used as a benchmark for the market in general, the man's investment has market performed.

• A woman buys stock in three companies at the beginning of the year. Six months later, those three companies have combined to provide 28% returns on her initial investment. The benchmark indices, by contrast, have only shown 17% returns over that time frame. The woman has outperformed the market.

• A man buys a managed mutual fund that seeks to beat the market. In the year he was invested in the fund he saw 12% returns. However, in that same time frame both the S&P 500 (.SPX-E) and the Dow Jones Industrial Average (.DJIA) see returns above 15%. The man has under performed the market.

• A woman purchases shares of an ETF, which she holds for two years. After this period of time, the value of the shares have declined 9%. However, benchmark indices have ALSO declined about 9% over that same time frame. The woman's investment has thus market performed.

See Also

• Index
• How Stock Indices Work