We all seem to second-guess our decisions when the market has gone up more than our portfolios, and have those moments when we start thinking maybe we are doing something wrong.

The reality is that you may not actually be doing anything wrong in your investment portfolio. To that point, tracking your portfolio based on one index is definitely not the way to measure performance.

Remember the Dow is 30 stocks of 30 different companies. It is not a good benchmark for determining if your portfolio is performing well, for two reasons.

First, it includes only 30 stocks out of the thousands traded on other exchanges. Second, because of the way the index is calculated, higher-priced stocks exert a greater influence over the index than lesser-priced ones. If your portfolio is invested in many different asset classes, comparing your overall performance to an index like the Dow isn't very helpful or accurate.

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The only accurate way to track your performance is based upon a basket of indexes comparable to your overall portfolio. For example, if you own mutual funds that invest in U.S. small cap stocks, the best index for comparison may be the Russell 2000. If you are looking at U.S. large cap stocks, the S&P 500 is a better measure than the Dow since it is a broader-based index with 500 companies, compared to 30 for the Dow.

I have had many questions from investors about whether they should increase their equity exposure, and consequently the risk in their portfolio.

For many the answer is no, but for some it is a matter of reviewing whether the potential increased return outweighs the increased risk that has to be taken. The best way to view this risk-reward relationship is by looking back at periods of time where we had either a really good market or a really bad one.

Regarding the latter, the two years that come to mind are 2008 and 2009. So if your portfolio lost 20 percent in 2008 but would have lost 30 percent with an increase in equity exposure, this is a start for determining the extent to which that extra risk impacts a specific portfolio.

The next step is to translate that percentage to real dollars. When we look at a percentage loss of 20 percent or more, we can rationally or intellectually say "Sure, I can deal with that." But once we translate it to real dollars, it has a different feel. So a 20 percent loss may seem OK but, if it represents a $10,000 or more loss in real dollars, it may not be so easy to accept.