how is a benchmark calculated 
different indexes use different methods to calculate their performance for example the s p 500 uses a free float market capitalization method the bottom linemarket benchmarks are important because they allow investors to compare their holdings performance against reliable metrics additionally benchmarks indicate the health of a market you can also see how a particular class is performing or view the equities market performance as a whole market benchmarks constantly evolve with new ones occasionally appearing based on changing investing strategies and investor sentiments the one limitation benchmarks have is that they are indicators of past performance there is no way of knowing how the investments that comprise an index will perform you can only view the results of your investment decisions which is a good thing because you can use the information to make adjustments or readdress your strategy 