Which of the following methods is used to assess investment performance?

The assessment of investment performance is fundamentally rooted in the comparison of returns against a benchmark. This method is widely accepted as it provides a clear reference point to measure how well an investment is doing in relation to a standard or index. A benchmark typically represents an average performance of similar investments or a market index, which allows investors to see if their investment is outperforming, underperforming, or matching the market.

By comparing an investment’s return to that of the benchmark, investors can gauge the effectiveness of the investment strategy, management decisions, and market conditions. This approach helps in understanding not only absolute returns but also relative performance, allowing investors to make more informed decisions regarding their investment choices.

While evaluating investment duration, calculating total expenses, and analyzing equity ratios can provide insights into different aspects of an investment, they do not directly assess the overall performance in the most comprehensive way that a benchmark comparison does. These alternatives might inform other areas of investment analysis but fall short of providing a complete performance assessment compared to dedicated benchmarks.