If you’re holding a mutual fund that has performed poorly, is it time for a change? Perhaps, as long as there are good reasons for making a switch.
A fund may have changed managers. Although a management change is not automatically a signal to sell, you should keep a close eye on the new manager to see how he or she performs.
Insight: Taking your time about selling can be a prudent move if you hold an appreciated fund in a taxable account because selling will trigger capital gains.
A fund may have changed strategies. If you’re not comfortable with the new strategy, it might be time to switch funds.
A change in strategy may cause some overlap in your portfolio. For example, if a fund sells all of its financial stocks and reinvests in health care, it might duplicate a fund you already own. You probably should sell one of these redundant funds and find another that will re-establish your position in financial stocks.