3 Bad Reasons to Sell a Fund

Your own criteria should drive buying and selling an investment - not the news, social media or short-term performance

Valerio Baselli 17 June, 2021 | 9:02AM
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Looking at the market today, it's easy to forget where we were at around 15 months ago. In March 2020, according to Morningstar's net flow estimates, Europe-domiciled long-term funds suffered record outflows of €246 billion, a staggering figure that dwarfs even the darkest period of the 2007/09 financial crisis - October 2008, when €108 billion exited funds.

In the end, as it is often the case, those who had the nerve to stay invested were richly rewarded. Many of the market declines of the past decade or so, including the stock market crash of 2008, are fast becoming faded memories for most of us. But it is the investors who endured these difficult times came out in perhaps the best shape.

And yet, the decision about whether to change your investment strategy or sell a fund is usually not clear-cut, even in hindsight. After the dust has settled on a decision and the investment has performed well or poorly, the “right” answer is wholly dependent on the individual. Selling criteria are not a one-size-fits-all list that fit every investor, but there are some situations when selling is particularly ill-advised. Christine Benz, director of personal finance at Morningstar, picks these three key examples.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Valerio Baselli

Valerio Baselli  is an Editor at Morningstar Italy.