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Funds 504: When to Sell a Fund

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1.
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.
2.
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.
3.
Is it okay to sell a fund that you've lost money on?
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Maybe. While buying on dips or holding on to break even are strategies that many investors employ, you don't have to, as long as you know that you'd never make such a volatile investment again. Learn from your mistakes.
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.
Why might you want to sell a fund that returns vastly more than you expected it to?
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It may not be the kind of fund you thought it was; for example, it may be taking on lots of risk. If a fund loses or gains more than it should, it may be taking on risks that you didn't think it took. You may want to sell it.