Benchmark

To quantitatively analyze the performance of a passively managed portfolio, it is necessary to compare the portfolio returns to those of the market. We need to identify the average market return using a relevant asset within our investment area. A benchmark for the stock market could be the S&P 500 index, while a benchmark for the cryptocurrency market could be BTC. There is no general rule for choosing a benchmark; the choice is entirely at the discretion of the portfolio manager who must consider the investment sector, geographical areas, and the types of instruments intended to compose the portfolio.

The choice of the benchmark to evaluate the performance of your portfolio depends on various factors, including investment goals, portfolio composition, and your risk profile. Here are some steps that might help you find the right benchmark. Remember that the choice of the benchmark should be relevant to the goals of your portfolio and your investment strategy. Also, it's important to consider that a benchmark doesn't necessarily represent a performance target; rather, it serves as a comparison measure to assess how your portfolio performs relative to the reference market.