Outperform is a term that can be applied to different aspects of the investment world. In its essence it means that something is doing better than something else, so it’s a comparison metric.
When a stock gains more than its peers in the same sector, it’s said that it outperformed the others. Likewise, when a stock is compared to a benchmark index, like the S&P500, it’s said that it outperformed if it produced higher yearly returns.
Generally, the returns achieved by investment managers and traders are often compared to the S&P500 yearly return to judge their performance.
When they make more than the S&P500 it’s said that they outperformed the market or produced alpha. Although it’s a very difficult task, there are traders and investors who beat the market for several consecutive years becoming legends in their field.
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