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.

Outperform Explained

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.

What Type of Investors Outperform the Market?

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.