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Funds 504: When to Sell a Fund

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1.
Before cutting an underperforming fund, check its _______.
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Three-year return against an appropriate index and its peers. Give funds a few years before cutting them loose, and be sure to compare them with appropriate benchmarks.
2.
In a mutual fund, style shift _______.
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Sometimes indicates a change in strategy. Funds can change styles without a strategy change. A manager may buy small-cap stocks, for example, but hold onto them as they grow into large-cap names. Thus, a small-cap fund may shift into a mid-cap fund without a full-blown strategy change.
3.
What is not a good reason to consider selling a fund?
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It performs just as you expect. If a fund loses or gains more than it should, it may be taking on risks that you didn't think it took. It may therefore be an inappropriate investment for you.
4.
If you began investing for retirement and now your goal is to buy a home in two years, _______.
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You may need to sell some of your aggressive funds. If your goals change, your portfolio should, too. Since you're now planning for a shorter-term goal, you may need to sell some of your aggressive funds and become more conservative.
5.
As your financial goals change throughout life, what should happen with your mutual funds?
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They should probably change too. At the very least, it's a good idea to make sure that they can meet your financial goals.