Author Topic: When do you ditch a mutual fund?  (Read 1184 times)

Megma

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When do you ditch a mutual fund?
« on: July 13, 2015, 09:43:18 AM »
In my 401k/IRAs I have a variety of fund choices and in each account I have chosen 5-8 funds. Iíve had these both accounts for 2 years, prior to that I had a 401k from another provider but due to job changes, switched to my current setup. When I chose the funds initially, I looked at their past performance and portfolio of offerings, expense ratios etc and tried to get a good mix of funds in terms of asset types, with good performance histories and low fees.

Earlier this year, for my 401k I stopped buying  a few the funds that were not performing well (~3% or lower returns since I owned it) and chose new ones. I did not sell the shares I owned but stopped putting more into these funds. I am hesitant to sell emotionally just because something happens to be down but I also want to get the best performance I can from my assets.

What do you do when a fund you already own is only performing mediocrely, barely keeping up with inflation or not? I, fortunately, have some other funds that are blockbusters and up 15% or much more over the past 2 years so my overall performance is still around ~10%. I also donít want to have all of my money going into only 2-3 funds or in very risky ones so I am wondering how others balance these choices? Do you only buy index funds? I have only a couple to choose from that are index funds, which Iím already buying and doing well as markets are up but do you think itís ok to only buy those since theyíre indexes and already providing diversification?

Thank you for your insights, while I have the first step of saving covered this is one area of ER/FIRE that I find challenging and makes me very nervous!

tldr:I am curious, when you decide to stop buying or sell an under-performing mutual fund from your 401K or IRA? What is the performance threshold for cutting your losses? Do you just buy the 1-2 index funds offered and feel it provides enough diversity?



forummm

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Re: When do you ditch a mutual fund?
« Reply #1 on: July 13, 2015, 09:45:12 AM »
You don't start or stop buying a fund based on its performance. You have a set AA and stick to it for life. Generally the most diversified and lowest cost funds (like VTSAX and VTIAX) are the way to go. If you want to post what funds are available to you in your 401k and their ERs, we can provide more feedback.