Over the last couple weeks, I’ve received a number of questions regarding portfolio performance. These include: Should I make changes if my investments didn’t perform as well as some indexes? Which index (S&P 500 or Dow Jones Industrial Average) should I use for comparison?

The S&P 500 or the Dow Jones Industrial Average are totally different from the average portfolio. To compare your portfolio to the performance of an index is like comparing the Detroit Tigers to the Detroit Lions – it’s not a fair comparison.

An index is meant to contain a select group of investments. For example, the Dow Jones contains 30 of the very largest companies in America.

How the index is maintained and how changes are made are based upon set criteria. The Dow Jones, for example, is not meant to be diversified or balanced. It’s meant to reflect a certain criterion.

On the other hand, an investor’s portfolio has to take a number of things into consideration – the most important is individual goals and objectives.

An index doesn’t care if you need money six months from now or six years from now. On the other hand, your portfolio better reflect your individual goals and objectives.

In building an index, things like taxes, diversification or risk are not taken into consideration. In building a portfolio, these items are important. After all, in a stock index such as the S&P 500 or the Dow Jones, it is assumed that your money is 100-percent invested. For most investors, that would be a mistake.

In addition, diversification – which protects investors in different market conditions – is also ignored in an index.

To compare your portfolio to an index makes no sense.

What index should an individual use to compare investments? There are numerous indexes – S&P 500, the Russell 2000, the NASDAQ 100, etc. The bottom line is there are more indexes than you can imagine and they each reflects something different. What they don’t reflect is what you are trying to achieve with your money.

Just because indexes may not be the best way to judge the performance of an your portfolio doesn’t mean you ignore them. The reason we invest money is to make money and therefore, performance is important.

However, if you use the wrong gauge to judge your performance, it is relatively useless. It’s sort of like comparing my golf score to Tiger Woods’ score. Not a very fair comparison.

It is important for investors to recognize there is a difference between their portfolios and indexes. Never equate the two because they’re two different, distinct items.

Good luck.

Rick Bloom is a fee-only financial adviser. His website is www.bloomassetmanagement.com. If you would like him to respond to your questions, please email rick@bloomassetmanagement.com.

www.hometownlife.com/story/opinion/contributors/rick-bloom/2015/01/29/measure-portfolio-performance/22458845/