Reasons to Sell a Mutual Fund
Mutual funds have become one of the most popular and (sometimes) profitable ways to invest over the past 20 years. Through dividend payments, capital gains and fund value increases, there are several ways to make money with a mutual fund. It's possible to make money both by keeping a mutual fund and by selling the mutual fund.
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Significant Fund Value Increase
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If the fund has "topped out," with an actual fund share price as high as it's likely to go, it is generally in the investor's best interest to sell out and realize a simple "buy-low, sell-high" profit.
Declining Component Stock Values
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If a fund is weighted toward a specific industry, for instance, and that industry is beginning a downturn, the fund value and profitability is only going to decline. In that case, it's time to pull out and find a growing industry to invest in.
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Poor Fund Management
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Some fund managers are experienced and effective at predicting market movement and using that knowledge to maximize fund value. Many others, however, aren't.
New Opportunities for Other Investment
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If your mutual fund is making a solid 6 percent profit and you see an opportunity for a new 9 percent investment opportunity, it's certainly in the investor's best interests to take the money out of the fund.
Management Fee Increases
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Mutual fund fees are often hidden throughout pages of contract documents and paragraphs of fine print. With some less reputable managers, gains from funds may not go far enough in offsetting fund management fees.
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