The Wall Street Journal has published an interesting article giving advice to investors on how to assess, and when to dump, losing mutual funds. The article makes the point that investors should not automatically clear out their losing funds, just like they shouldn’t always buy winning ones. Funds have their own reasons for poor performance and those reasons can have a big impact on whether they should stay in a portfolio. Here are four questions to ask in assessing funds, “Does the fund have a good process in place?”, “Is the manager sticking to his or her own guns?”, “Is there a new manager, and do I trust him or her?”, “Is this negative performance coming in a segment of the market in which it is tough to beat index funds?”.
FINSUM: Good funds can have significant down periods, so it is important to have a methodology for deciding if and when to dump them.
- mutual funds
- active management
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