When Should You Dump a Mutual Fund?
Mutual funds have been the darlings of retirement accounts for quite some time. They add instant diversity, and generally grow at a reasonable, inflation beating rate. And they are usually considered a bit safer than buying individual stocks. Safety in numbers and all that. On the down side, though, a mutual fund often has all sorts of fees — load fees and administrative fees and more.
So when do you know it is time to say goodbye to a mutual fund? Investopedia offers 8 indications that maybe it’s time to get rid of a mutual fund:
- Rebalancing your investment portfolio. It is a good idea to periodically review your investment portfolio and change the allocations. This means that you may need to get rid of a mutual fund in order to properly balance your investment portfolio.
- Mismanagement. This is a big one. If changes are being made to your mutual fund, or if you are concerned about the management style, you should consider getting rid of it.
- Growing out of mutual funds. If your mutual fund is something that you invested in because you didn’t have any real idea of how to invest, but you knew you should, you might have outgrown it. As you gain more experience, you may feel more comfortable with stocks, and a mutual fund becomes unnecessary.
- Changes to your life needs. At different points in your life, depending on your needs and goals, you may need different investments. A mutual fund may not be the best choice at some junctures.
- Mistake. You made a mistake in a mutual fund purchase. So you need to rectify it. Immediately.
- Valuation. If the mutual fund no longer has good valuation, you should consider dumping it.
- You see something better. If you can sell your mutual fund and put the earnings toward something better, that may be a good idea.
- Taxes. Check with a tax professional.There may be advantages to getting rid of that mutual fund.
Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.
