One thing is for sure, selling is much more difficult than buying. Investors typically make the mistake of overreacting and hastily selling on a little bad news. Alternatively, investors can also suffer from paralysis that prevents them from selling losing investments because they are reluctant to admit they made a mistake or because of their narrow focus on recovering their original investment.

Following are some tips for weighing your reasons to sell, aiming to help you better recognize when it is time to say goodbye and hopefully improve your long-term position in the market. Remember, selling a mutual fund may result in a taxable capital gain or loss. However, selling a fund in an IRA or qualified plan would generally not be a taxable event. Please consult your tax advisor when making sell decisions.

1. Consider selling if it doesn’t belong in your asset allocation plan — The bottom line is that you cannot make an intelligent investment decision without a financial plan that is specifically tailored to your personal goals, timeframe and risk tolerance. The heart of a good plan is proper asset allocation. Remember that a fund may be doing a good job for you but if your needs and risk tolerance change over time, you must reinvest and rebalance your capital to meet those needs. When rebalancing periodically, typically done at least once annually, you may need to sell funds with superior recent performance, which may be emotionally challenging. However, it may help to think of it as locking in your profits and a mechanical way to force yourself to follow the old adage of “buy low, sell high.” While it is always tempting to let your “winners” ride, that’s how people end up with two-thirds of their portfolios in one fund when the bubble bursts and end up big “losers” over the long term.

2. Consider selling if the management changes — Simply stated, a mutual fund is only as good as the person whose job it is to pick the stocks. While a five-star track record of a fund may look impressive, the manager who’s responsible for that record may no longer be on the case. If you invest in actively managed funds, you or your financial advisor should focus on the current manager’s track record. Has he been successful at other mutual funds? Were those funds similar to the one he’s heading up now? Even if you didn’t buy a fund from the fund manager, turmoil at the firm may be a good reason to get out. If a number of key people leave, there may be more to follow, and the quality of management is likely to dip.

3. Consider selling consistent underperformers — Poor short-term performance may not be a good reason to sell a fund. (In fact, it might even be a good reason to buy additional shares.) However, if a fund persists in lagging over the longer term, anything over three years, it is worth reconsidering. Remember that if you own an index fund, this doesn’t apply because your objective is to capture the market, not exceed it. However, if you’re paying for active management, there’s no reason you should put up with extended sub-par performance. However, before cutting the fund loose, be sure that you are comparing your underperformer to an appropriate benchmark, such as its Morningstar category or a suitable index. If your fund consistently underperforms its peer group and broader market indexes, finding a better pick may be the way to go.

4. Consider selling if you can get a tax break — If your fund account is in the red, it may make sense for you to sell and take a loss you can use to offset future taxable gains. Capital losses are used to offset capital gains, plus an additional $3,000 of capital losses can offset ordinary income — which is often taxed at a higher rate than capital gains. And capital losses that exceed the $3,000 threshold may be carried forward indefinitely. (Before you make any moves or sales, make sure you consult with your tax advisor).

5. Consider selling if the fund is tax-inefficient — Some funds have portfolio turnover rates of 400 percent or more. That generates high trading costs (which will be invisible but still payable by you) and potential capital gains distributions even though you leave the money invested. Sometimes very high turnover is a necessary but expensive part of a strategy, but you need to know how costly it is and why you are tolerating it, if you chose to do so.

6. Consider selling if expenses are too high — In choosing from among similar fixed-income funds, expenses are one of the most important things that separate the leaders from those that lag. Consider selling funds that raise their expenses, unless taxes or back-end commissions dictate otherwise. This is a red flag that indicates shareholders’ interest could be taking a back seat.

Remember that a qualified financial advisor can help you create a comprehensive financial plan which includes recommendations for buying and selling funds and periodic rebalancing to help you best reach your long-term financial goals.

This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. The views expressed may not be suitable for every situation.