What To Do With An Old Mutual Funds Investment

Posted on September 11, 2013 at 11:00 PM PDT by

If you’re a retirement investor of a certain age, you likely have a mutual funds investment in your portfolio — or two.

Probably, you’ve owned it for years. As a young investor, concerned about correctly picking among stocks and bonds, you likely opted out of the whole problem by purchasing funds.

mutual funds investment

For a number of years, that idea worked out fine. Your fund, led by a famous money manager — one with a bestselling book and regular appearances on PBS — seemed bulletproof. You were doing things right.

Twenty years on, that guy has long since retired. His fund runs on fumes, now on its ninth manager. The brokerage can’t seem to get rid of the beast. They would lose thousands of customers in the process.

Yet performance has been ho-hum. You pay the same fund fees as a decade earlier, but the payoff seems less and less worthwhile.

Well, it’s worse that that. In fact, if you still pay those mutual funds fees — and it’s very likely nothing has changed on that score — then you have actually given up a huge portion of your potential gains.

How much? Try 30% or so over a decade. Maybe 50% if you have held it 20 years.

That’s right, some manager you don’t even know, a man or woman you never meant to hire, has take a giant slice of your retirement money for themselves.

The problem is, we get attached to longtime holdings. Our emotions trip us up, even when the evidence for action is plain.

So, what should you do with that aging bull of a mutual funds investment? It’s an important question.

Mutual funds investment questions

No, this is not advice for any specific individual. I don’t know anything about your particular circumstances, the tax impact of selling now or how selling a single fund might affect your overall portfolio.

There are, however, some important points to consider.

Question No. 1: If you bought that fund 10 or 15 years ago because of a famous manger, now departed, do you still have a good reason to own the fund?

Question No. 2:  If you continue to pay rock star fund manager fees for a crew of new, untested names who have simply inherited the brokerage flagship, are they worth it?

Question No. 3:  Open the prospectus and really read it. Would you buy this fund today, if the marketing name were blacked out and you did not know its history?

If you answered “no” to any of these questions, it’s time to look in the mirror and be honest about what you hope will happen. If you hope the star manager will come out of retirement and do his or her magic once again, well, you might be kept waiting.