When to sell a losing fund

Question: How do you know if and when you should get rid of a fund and purchase another? One fund is down 33.7 per cent over 1.5 years and the other is down 18.4 per cent, also over 1.5 years. I am not happy with this and would like to get into funds making money instead of losing at this high rate. My total portfolio is down about 6 per cent over 1.5 years. – J.N.

Gordon answers: The first thing you need to look at is how the losing funds are performing relative to others of the same type. To get an accurate assessment, you’ll need to consider the management style as well as the fund category.

For example, most value-oriented Canadian equity funds will show much better results than growth-oriented funds over the period you mention. If the funds are doing better than average in relative terms and they fit into your overall portfolio objectives, then you may want to keep them. If they are below average or don’t suit your long-term goals, then it is time to move on.