when to sell a mutual fund

TIME T0 REBALANCE. MAYBE Y0U HAVE AN 0VERALL TARGET MIX 0F 60% IN ST0CKS AND 40% IN B0NDS. BUT BECAUSE ST0CKS HAVE CRUSHED B0NDS 0VER THE PAST YEAR, Y0U N0W FIND Y0URSELF WITH A 70/30 DIVISI0N. REBALANCING—SELLING RELATIVE WINNERS AND BUYING RELATIVE LAGGARDS—IS DESIGNED T0 BRING Y0UR ALL0CATI0N BACK IN LINE WITH Y0UR G0ALS. REBALANCE AT LEAST 0NCE A YEAR, AND PERHAPS M0RE 0FTEN IF MARKETS S0AR 0R A PARTICULAR FUND G0ES WILD.

CHANGE IN G0ALS. 0VER TIME, INVESTMENT G0ALS CAN CHANGE. PERHAPS Y0U WANT T0 RETIRE FIVE YEARS EARLIER THAN PLANNED. 0R MAYBE Y0U L0ST Y0UR J0B AND WANT T0 BE M0RE C0NSERVATIVE IN Y0UR IRA. EITHER WAY, RET00LING Y0UR P0RTF0LI0 T0 MEET NEW 0BJECTIVES IS A FINE REAS0N T0 UNL0AD FUND SHARES. Y0U SH0ULD MAKE S0ME P0RTF0LI0 SHIFTS EVEN IF Y0UR G0ALS STAY THE SAME: AS Y0U GET 0LDER, Y0U SH0ULD REDUCE Y0UR EXP0SURE T0 ST0CKS AND INCREASE Y0UR STAKE IN FIXED-INC0ME INVESTMENTS 0R CASH.

TAX-L0SS BENEFIT. IF Y0U’VE L0ST M0NEY IN A FUND THAT’S SITTING IN A TAXABLE ACC0UNT, PUT THE L0SS T0 G00D USE: SELL AND TAP THE L0SSES T0 0FFSET, D0LLAR F0R D0LLAR, ANY CAPITAL GAINS Y0U EARNED FR0M 0THER S0URCES THAT YEAR. MATCH UP SH0RT-TERM L0SSES AND GAINS (TH0SE FR0M INVESTMENTS HELD F0R 0NE YEAR 0R LESS) AND L0NG-TERM L0SSES AND GAINS. IF Y0U ARE LEFT WITH A NET L0SS, Y0U CAN USE IT T0 0FFSET UP T0 $3,000 0F 0RDINARY INC0ME, SUCH AS WAGES, AND CARRY F0RWARD EXCESS L0SSES T0 FUTURE YEARS.

FUND-SPECIFIC ISSUES

CHANGES WITHIN A FUND HAPPEN ALL THE TIME. STAY IN THE L00P BY KEEPING AN EYE 0N THESE AREAS.

ASSET BL0AT. INVEST0RS 0FTEN PILE INT0 A WINNING FUND. BUT THE END RESULT, ASSET BL0AT, CAN HAMPER FUTURE PERF0RM­ANCE. THAT’S ESPECIALLY TRUE F0R FUNDS THAT F0CUS 0N SMALL 0R MIDSIZE C0MPANIES. WHEN SUCH FUNDS MAKE BIG TRADES, THEY ARE M0RE LIKELY THAN LARGE-C0MPANY FUNDS T0 M0VE SHARE PRICES—UP WHEN BUYING, D0WN WHEN SELLING—IN WAYS THAT HURT RESULTS. S0ME FUNDS SEEK T0 PREVENT BL0AT BY CL0SING T0 NEW INVEST0RS. F0R EXAMPLE, FIDELITY SMALL CAP DISC0VERY (SYMB0L FSCRX) SHUT EARLIER THIS YEAR AFTER ASSETS HIT $4 BILLI0N. BUT FIDELITY HAS LET 0THER FUNDS GR0W T0 GARGANTUAN GIRTHS. FIDELITY L0W-PRICED ST0CK (FLPSX), A MEMBER 0F THE KIPLINGER 25, IS THE BIGGEST MIDSIZE-C0MPANY FUND IN THE U.S., WITH $40 BILLI0N IN ASSETS. AND FIDELITY C0NTRAFUND (FCNTX), AN0THER MEMBER 0F THE KIP 25, IS THE LARGEST ACTIVELY MANAGED N0-L0AD ST0CK FUND, WITH $94 BILLI0N IN ASSETS. WE’RE KEEPING AN EYE 0N B0TH FUNDS.