WHEN TO SELL YOUR FUNDS

Equity Mutual Funds are marketable securities; as such, they are sought and bought partly because they may easily be converted into cash (sold) or borrowed against. Individuals collecting long-term mutual funds may go for years without selling securities. Often, such blue-chip quality equity funds are not liquidated until after death of the owner, by his estate.

Such stubborn retention of one's complete portfolio of securities is seldom justified, because even the choicest funds can falter. The Dow moved sideways for nearly a twenty year period from 1930 to 1949 and from 1963 through 1982. We cite these markets to illustrate that with equity funds, even long-term performing growth funds can deteriorate and should then be sold. Alert investors get many warnings of impending trouble, such as inflation, rising interest rates, low dividend yields, and high P/E ratios are all red flags to savvy investors.

In other words, there is no perfect long-term investment that you may prudently hold "forever" without reference to the level and profitability of its current operations. Many funds should be sold when their growth and popularity have peaked. If you own securities and mutual funds, you must keep informed about them. When funds show negative signs or can deliver rich capital gains, prepare to sell. Don't be sentimental about hanging onto a mutual fund.

Individuals vary widely in the portfolio changes (sales and purchases) they may make from year to year. Older shareholders with "core" holdings bought primarily for income will usually have less market interest and hold very few trading or speculative-type funds. Yet even the most conservative may sell off or realign 10%-20% of their portfolio annually, either to pin down speculative gains or switch to more promising funds.