Like penny stocks? Want to know how your portfolio is performing in this crisis? Comparing your portfolio to the Dow Jones or S&P 500 indexes is not much use, as these measure America’s biggest blue-chips. Jonas Elmerraji picks three more suitable benchmarks to gauge your investing fortunes.

This from Penny Sleuth:

Unless you’re heavily hedged, it’s best to go with some sort of objective benchmark to see how well you’re doing. Don’t think that there aren’t benchmarks out there for small-caps…there are. Here’s a look at a few of them:

Russell 2000 Index — this index of 2000 small-caps is one of the most popular benchmarks for people who invest on the large side of penny stocks.

S&P Small-Cap 600 — unlike its big brother, the S&P 500, the Small-Cap 600 is a listing a 600 small-cap stocks picked by Standard & Poor’s.

Small-Cap Mutual Funds — small-cap mutual funds are another good means of comparison for penny stock investors. With so many different kinds of mutual funds out there, it’s a lot easier to find one like your own portfolio.

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When Benchmarks Don’t Work

Benchmarking your investments only works when you pick a benchmark that’s a lot like whatever you’re investing in. That means that if your money is in the teeniest and tiniest of penny stocks, you’ll have a tough time finding a benchmark that’s a fair match to your portfolio.

If you’re a fan of really small penny stocks, using absolute returns might make more sense to measure your performance. So then, how can you get an objective point of view about your performance? Well, talking to similar kinds of investors is a start. If you know how well (or poorly) people in the same kinds of investments are doing, you can get a pretty good idea of how well you’re making out.

While the S&P is a great tool for benchmarking the performance of blue chip portfolios, it’s not a very useful measure if you’re a penny stock investor.

Source: Picking a Benchmark for Your Penny Stock Portfolio