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Online Investing Hacks by Bonnie Biafore

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Hack #70. Know When to Fold ‘Em

Buying funds is easy—selling them when the time’s right is the tricky part.

It’s an uncomfortable feeling, opening the statement of a fund that you really don’t want to own any more. For many fund investors, lack of time, lack of knowledge, and possibly lack of guts conspire against selling even the worst mutual fund dog. Too many investors cut the tie at the wrong time, whereas others turn to new funds for their investing thrills, leaving the old ones collecting dust and poor returns. Don’t ignore your mutual funds. It’s easy to review them and decide what to do.

When Funds Go Bad

Sometimes, you need to sell to protect your portfolio from a mutual fund that is heading for a dive. Funds usually give off warning signs before things go south. If you’re paying attention, you can decide what to do before a warning sign becomes a real problem:

Departing manager

With actively managed funds, a fund manager is the rock on which the success of a fund rests. Look at a new manager’s record to see whether he has produced results similar to the previous manager, and, if not, consider another fund.

Proposed fund merger

When a fund company sends you a proposal to merge your fund into another fund, check out the new fund to make sure you want to invest in it.

Changing investment philosophy

When a mutual fund no longer invests a majority of its funds in the type of investments it represents, such as a small-cap fund that invests primarily in mid-cap stocks, look for a fund ...

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