5 reasons to sell a fund

It's often hard for investors to break up with a fund. Some people become attached to a fund they've owned for a long time. Others keep waiting for a poor performer to make a comeback. And some hold on to a fund without realizing it has changed.

Here are five reasons to review the funds you're investing in and determine if it's time to part ways:

  1. Weak performance. Any fund can have a bad year, and that's no reason to dump it. The problem, for example, could be that the fund's investment style is temporarily out of favor.

    Compare the fund performance to its benchmark and peers to determine if the weak performance is specific to that fund or to the specific investment style. If the fund consistently underperforms its benchmark and peers post gains, that could be a sign to cut it loose. Remember, benchmarks and peers may have different levels of fees, so add fund fees for a fair comparison.

  1. Change in fund management. A top manager leaving a fund doesn't mean you should bolt, too. But you should keep an eye on the fund as the new fund manager tweaks — or overhauls — the fund strategy or objectives to make sure you're still happy with your investment. In fact, some seemingly lackluster funds have revived under new management.

    If the new manager changes the fund's strategy so it no longer fits with the strategy for your portfolio, it may be time for you to make a change, too.

  1. It's grown too big. Sometimes a fund can outgrow its success. A high performer can be flooded with so much new investor money that it becomes difficult to manage the fund or to find enough good investments to buy. Performance may then suffer.

    Some funds try to protect against this “asset bloat” by closing to new investors. Or a fund could revise its focus, which may not be the type of investment your portfolio needs. Some funds use multiple subadvisors to avoid this problem. When a fund grows, a new subadvisor may be brought onboard.

  1. Fund style drifts. It's possible, over time, that a fund has shifted its style. For example, your small-cap fund could seem to lean toward mid-cap stocks or your fund's value focus could appear to be veering toward growth.

    You may have to ditch the fund if it throws off your asset allocation. Or if you still like the fund, you can keep it but add another fund to get your asset allocation back to what you want.

  1. You have a new focus. Maybe you bought that aggressive growth fund just as you were starting to accumulate assets. But now as you near retirement, you want a fund that's less volatile and generates more income. Your fund lineup may need to be readjusted as your financial goals change.

Tip: Log into your MissionSquare account periodically to review your investment lineup. Your plan lineup could change from time to time, and it helps to know which funds are available to you. If regularly reviewing funds is burdensome, consider target-date* or target-risk funds that will handle this duty for you.

Have questions about your investment portfolio. Connect with your MissionSquare Retirement Plans Specialist.

*A target-date fund is not a complete solution for all of your retirement savings needs. An investment in the fund includes the risk of loss, including near, at, or after the target date of the fund. There is no guarantee that the fund will provide adequate income at and through an investor's retirement.

Please note: The contents of this publication provided by MissionSquare Retirement is general information regarding your retirement benefits. It is not intended to provide you with or substitute for specific legal, tax, or investment advice. You may want to consult with your legal, tax, or investment advisor to review your own personal situation. Some of the products, services, or funds detailed in this publication may not be available in your plan. This document may contain information obtained from outside sources and it may reference external websites. While we believe this information to be reliable, we cannot guarantee its complete accuracy. In addition, rules and laws can change frequently.

Return to top