Business

Five good reasons to consider dumping your mutual fund

While there are plenty of reasons to stick with a mutual fund even if it's had one bad year, sometimes it makes sense to bail. Here's some advice from experts on what to look for:

Chronic underperformance: If a fund's return falls below the average of its peers for one year, that's not necessarily reason to pull out. But if that happens a few years in a row, and the fund offers no advantage when it comes to fees, move your money elsewhere.

New managers/strategy: If a new individual or team replaces the fund manager whose strong record drew you to the fund, review the new adviser's credentials. Ditto for a fund that modifies its investment criteria, either through a change to the fund's prospectus, a more subtle shift by the fund's managers, or through a merger into another fund that may have a slightly different style.

Rising fees: When investment losses or modest returns are to be expected, management fees and other expenses loom large in assessing which fund to choose. If a fund raises fees to offset declining asset values, consider whether the fund's prospects are sufficiently bright to offset the higher costs.

Duplication in portfolio: If you find you have several similar funds in your portfolio with comparable holdings, you may want to pare back the laggard, or the most expensive fund.

Minimizing: If you're nearing your investment goal, but there are less volatile investments that could keep you on track, by all means shift your money to a safer haven.

Associated Press

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