The criteria for selling a mutual fund differ greatly from those guiding the buying and selling of individual stocks. Fund management change, long-term underperformance, and shifting investment strategies are all valid considerations
Mutual funds are managed by fund managers who can take on celebrity status. Changing fund managers can be a blessing or a curse to your portfolio. Respected managers can lead to a decline for the funds they leave and a gain for the funds they assume. In addition, after doing your own research, you may determine that you agree or disagree with the fund manager, which can lead you to buy or sell.
While funds, by their nature, are the sum of the individual stocks they own, long-term underperformance, even that mimics the stock market, may be a sign that the mutual fund is managed improperly. Funds are designed to be more divers and, therefore, more insulated from the peaks and valleys of the stock market. Of course, underperformance of a fund in the face of a bull market is a strong indication that you should be looking at replacements.
Funds strive for diversity and growth insulated from market turmoil by incorporating a particular investment strategy. Those strategies can shift over time. When that happens, you should determine if the new strategy is still consistent with your investment goals. If not, it’s time to sell.
May the bull be with you.