Financial Industry Regulatory Authority (FINRA) Practice Exam 2026 - Free FINRA Practice Questions and Study Guide

Relative returns are typically used to measure the performance of an investment over time because they provide a comparison against a benchmark or a market index. This comparative analysis allows investors to see how well an investment is performing relative to other standard benchmarks, which can include indices like the S&P 500 or other relevant market indicators. By using relative returns, investors gain insight into the effectiveness of their investment strategy and can make more informed decisions based on performance metrics.

This approach is particularly valuable because it contextualizes performance, highlighting whether an investment is outperforming or underperforming against the market or similar investments. Investors often seek to maximize relative returns as a way to achieve better performance in a competitive market environment.