You might want to think back for a minute why you got into that Mutual Fund to begin with. Did your broker tell you it was
a safe investment? Did your broker say it would beat the S&P 500 average? Did your broker show you some previous returns
and say "look at how well this fund performed in the past?"
Whatever the reason was then, ask yourself, is that reason still valid today? The fund you bought yesterday may be time to
sell today.
The question is...how do you know? What do the large institutions focus on when they upgrade or downgrade a mutual fund,
and shouldn't you be focusing on the same things? Do a little research and find out answers to the following...
1) Is it the same fund manager as when you bought? Fund managers change, they move on, they get demoted or fired. Has fund
management changed and are you really in a different fund?
2) Does the fund still meet your overall risk profile? Has the fund lost so much money that it no longer provides a safe
return on investment? Is staying in the fund more risky than sitting on the sidelines in cash?
3) Is the fund still investing in the same types of instruments as when you first bought into the fund? Mutual funds often
change instruments because the original instruments are no longer lucrative. Say you invested in a fund that primarily
invested in financial stocks. Today, financial stocks have taken a real beating. Mutual fund managers have had to exit out
of those stock positions and get into others. When was the last time you looked at the set of stocks your mutual fund is
now trading?
4) How is your mutual fund now performing? What if your mutual fund no longer is producing gains for you, should you
remain in that fund? And how many quarters of loss are you willing to take before you say to yourself, enough is enough.
Not every mutual fund does well every quarter. But how many down quarters will it take before you decide to move on. Many
fund managers will say "I didn't lose as much money as the other fund managers." Is this reason enough to stay with that
fund? Have you ever seen a fund put money back into your account after they took losses?
5) Probably the most important question you need to ask yourself is..."was it a mistake to buy into the fund in the first
place." Think back to what you were doing when you first bought into the fund. Maybe you were working for a company and it
was part of the 401K. Maybe your spouse saw an advertisement for the fund. Maybe your friends were in the fund and
recommended it to you. But perhaps you yourself didn't do your homework on the fund to know that this was really where you
wanted to invest. While it may be hard to admit your mistake, it may be harmful to remain in the fund just so that you
don't have to admit your mistakes.
Mutual funds are a mixed blessing. When the fund is doing well, you pat yourself on the back and tell yourself its ok to
have someone else, a professional, manage your money. And when that fund takes a dump, isn't it always easy to blame that
someone else for your losses? The real fact of the matter is that you need to take responsibility for your own portfolio.
You should never just trust a broker to make the decisions about your financial future.
If you are ready to learn to trade your own account, even some portion of your own account, perhaps you should look at
Shadowtraders.com. They will start you at the beginning and walk you through the maze of confusion that is the financial
world.