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If your portfolio is down while a major index is up, first check whether you are comparing the same dates, return basis, and type of investment. A headline index is not a universal measure of “the market”: the right benchmark should reflect your portfolio’s strategy and holdings. Once the comparison is fair, review your asset mix, concentration, fund tracking, and costs before deciding whether anything needs to change.
Start by checking whether the comparison is fair
Write down the portfolio’s start and end dates, then compare it with the benchmark over those exact dates. Confirm what each return figure includes: investment income, fees, and deposits or withdrawals can affect the comparison. Check your account records or ask your provider how its performance figure is calculated; there is no single calculation method established here for every account.
Next, ask what the index represents. Indexes are baskets built to represent particular markets, sectors, or economies, and they differ in how they select and weight investments. The S&P 500 or Dow may be a useful reference for some U.S. stock exposure, but neither is a universal stand-in for a portfolio that also holds bonds, international or small-company stocks, cash, or other investments. Investor.gov explains index construction and index funds in its Investor Bulletin: Index Funds.
For a fund or portfolio, seek a benchmark that fits the stated investment strategy and the investments actually held. FINRA notes that funds are measured against an appropriate market index or benchmark based on their strategy and holdings; see its guide to mutual funds.
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Check whether your asset mix explains the difference
Stocks, bonds, cash, and other asset categories do not move in lockstep. If a benchmark is rising because of the type of assets it represents while your portfolio has more exposure to other categories, their returns can diverge without the portfolio malfunctioning. Diversification spreads exposure and is intended to reduce the risk of major losses from overemphasis on a security or asset class; it does not make a portfolio track a rising stock index.
Compare your intended allocation with what you own now. Look at broad asset classes, then check whether a single holding, sector, region, or market segment accounts for a large share. Concentration can make results very different from a broad index. Investor.gov’s Beginners’ Guide to Asset Allocation, Diversification, and Rebalancing and FINRA’s Asset Allocation and Diversification explain these concepts.
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Inspect funds, tracking, and costs
If you hold an index fund, its return may not exactly match the index it follows. Investor.gov says an index fund may underperform its index because of fees and expenses, trading costs, and tracking error. For a fund, review its prospectus and latest shareholder report for its benchmark, holdings, risks, expenses, and performance information. These materials are typically available from the fund company or financial professional and may also be available through SEC EDGAR. See Investor.gov’s Index Funds page.
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One free scan finds every outdated or missing driver and matches the right update for your exact hardware.Free scan · exact hardware matchInclude more than the fund’s stated expense ratio when investigating costs. Account for advisory or service charges, transaction charges, and applicable trading costs. Fees reduce the amount left invested and available to earn returns. If a charge is unclear, ask your financial professional or provider to identify it. The SEC’s July 23, 2025 Investor Bulletin on how fees and expenses affect an investment portfolio describes their impact.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Decide whether a change is warranted
A short-term gap against a headline index, by itself, does not establish that your plan is wrong. First determine whether your goal, financial circumstances, time horizon, or risk tolerance has changed. Investor.gov says a change in time horizon is the most common reason to change an asset allocation; it also advises against changing allocation merely because asset categories have performed differently recently.
If your actual mix has drifted from the allocation you chose for your goals and risk tolerance, consider whether rebalancing is appropriate. Rebalancing moves a portfolio toward its planned mix. You may be able to direct new contributions toward underweighted categories, rather than selling investments; sales or other trades can create transaction fees or tax consequences. FINRA says there is no official schedule for rebalancing, though investors may consider whether to do so during an annual investment review. Its Investor Tips for Turbulent Markets also counsel against letting turbulent conditions alone drive decisions.
If you cannot explain the comparison or a charge, bring the benchmark, date range, allocation, and relevant fund disclosures to your provider or financial professional and ask for a specific explanation. General performance guidance cannot identify the cause for an individual account without its holdings, dates, and cash flows.
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