Defensive Investing: Four Reasons to Sell a Mutual Fund Laggard

When it comes to poor performance in a mutual fund, how long is too long? Evaluating the performance of a mutual fund is a bit different than evaluating the performance of an individual stock, chiefly because of the time frames involved. Mutual-fund investors should actually evaluate the performances of the funds they hold over a longer time period than they might use to gauge the returns generated by a stock. Let's face it: Six-month or one-year returns on a mutual fund aren't terribly significant in a long-term portfolio that is based on a well-conceived allocation plan . Short-term weakness could just be a sign that the particular sector in which a fund invests -; or even the fund's particular investing style (growth, value or momentum, for instance) -; is currently out of favor.
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