What is a benchmark?
A benchmark is the yardstick you hold your return up against — typically an index covering the same market you invest in. If your portfolio of US stocks rose 8% while the S&P 500 rose 12%, you did worse than your benchmark, even though you made money. Without a benchmark you do not know whether you were skilled — or whether everything simply went up.
Each tile is a stock. The big companies take up most of the index.
Why it is necessary
+8% sounds good. But if a cheap index fund gave +12% over the same period with no effort, your choices cost you 4 percentage points. The other way round: −5% sounds bad, but if the market fell 15%, you actually did well. A return says nothing on its own. It only means something once you know what the alternative gave.
Choose the right benchmark
The benchmark must resemble what you own. If you own Danish stocks, the C25 is reasonable. If you own a world fund, MSCI World is reasonable. If you own US technology stocks, the S&P 500 is too broad — the Nasdaq 100 fits better. And use a total return index (with dividends), otherwise you compare your return including dividends with an index without them.
Example: Your fund returned 9.5%. The price index returned 8% — the fund seems to win. The total return index returned 10.2% — the fund actually lost 0.7 percentage points. That is typically the costs you are seeing.
Active funds and their benchmark
Every active fund names a benchmark it tries to beat. Historically a minority succeed over ten years or more, after costs. Always look at a fund's return relative to its benchmark, not alone — and over at least five years. One good year can be luck.
The typical beginner's mistake
Picking a benchmark that is easy to beat. Compare your US technology stocks with the C25 and you look brilliant in good years and terrible in bad ones — without it saying anything about your choices. Compare apples with apples.
How you see it in Kiggo
Enter your own purchases in Kiggo's portfolio, and it shows your return per stock and in total — so you can hold it up against an index. Look up a fund and it says which index it follows — that is the fund's benchmark. Kiggo passes no verdict on whether you "beat the market"; the numbers are yours to judge.
Related terms
Frequently asked questions
What is a good benchmark for a beginner?
A broad world index such as MSCI World or MSCI ACWI, as total return. That is what a cheap world ETF gives you with no effort — and therefore what your own choices should be measured against.
What does "beating the market" mean?
Getting a higher return than your benchmark after costs. It is harder than it sounds — and it should happen over many years, not one, before it means anything.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-23.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
