When to Sell a Mutual Fund

Determining when to sell a mutual fund is much different than when you would sell a standard stock. While many people believe that the best time to sell a mutual fund is when it stops performing, this isn’t necessarily the best time. The key with mutual funds is because they are so diversified you never know exactly what is going on, unless you do your homework. The reason why the fund might be down could be because of a move to invest in a stock that they foresee will go up in value. So, in order to make the most of my fund, I try to read the runs. If I notice that they are changing the stocks around in the portfolio, then I’m going to prepare myself for a short term loss, but a longer term gain.

The key however is determining what you are looking for out of a mutual fund. If you are looking for consistent performance and want to see investments go up as they are purchased then I would suggest a different fund. However, if you are able to ride it out, this could be the perfect fund for you.

I essentially determine when I’m going to sell my funds based upon its’ ability to meet my needs. If the fund stops meeting my needs for growth, then generally I sell off the fund. Without growth, I’m not going to make any real long term money, so it doesn’t fit my investing objectives. Some may see the short term gains as enough reason to stay in, and aren’t too worried about future growth.

This is a somewhat different concept however with a closed end fund. I generally get out of a closed end fund when it reaches a premium price. Once it reaches a premium, I get out and get back into something that is at a discount. I continuously play this game and make a majority of my income in investments from this method.