What kind of “performance” would you rather have, “absolute performance” or “relative performance”? Perhaps you should not necessarily compare your performance to a market index (benchmark) because:
1) The benchmark usually holds no cash. It is at 100% invested in the underlying securities all of the time
2) If the benchmark has a 20% loss, but your account is only down 15%, you have “outperformed” the benchmark.
So, saying you outperformed the benchmark by 5%, when you have lost 15%...may not feel so good.
In the case of a stock or bond market index, a benchmark is a fixed group of securities that are treated as a “portfolio” for purposes of measuring the change (positive or negative) of that group. One must realize that comparing your own portfolio to a “benchmark" such as a stock market index can be misleading.
Benchmark indices are usually a static, fully invested group of securities and will almost never be closely comparable to a person's own portfolio. For example, most individual portfolios are not 100% invested in a static group of stocks and bonds, nor should they be.
A person's personal portfolio should be managed taking into consideration all of the particulars of one’s investment needs, net worth and other planning goals, etc.
Advisory firms and investment product companies (mutual funds, etc.) often measure their performance relative to a market index. They often state their performance in terms of one-one hundredth of a percent. So, even if you have beaten the market index in a given year, on a relative basis, a given portfolio might still be down 15 or 20 percent.