Quiz time! You should sell you mutual fund when:

        A. It shows consistently poor performance relative to its peers.

        B. Its manager shuffles off to Buffalo.

        C. The Earth stops spinning, and everyone flies off.

        If you answered C, you probably work for the mutual fund industry, which generally regards selling a fund as one of the seven deadly sins.

        But you invest in mutual funds to make money, and if your fund disappoints, you should consider moving elsewhere. It's not a decision to make lightly. But there are several good reasons to sell your mutual fund, and they have nothing to do with the end of the world as we know it.

        The first is poor performance. Roy Weitz, publisher of Fundalarm.com (www.fundalarm.com), focuses his Internet site on when to sell your fund. It's one of the most interesting fund sites on the Web.

        So how do you decide when to sell?

        “The first cut is to look at a fund's performance against a benchmark,” he said. If you own a large-company fund, use the S&P 500's total return the past three years. Most fund companies expect managers to beat their benchmark over a three-year period, and there's no reason why you shouldn't, either.

        Before you decide that your fund is run by a dolt, however, take a closer look. Conservative managers who look for beaten-up stocks have fared poorly the past three years, for instance. If that's what you want, you shouldn't complain.

        On the other hand, a fund that's lagging its broad benchmark as well as funds with the same investment style is probably a stinker. Furthermore, really awful funds tend not to improve with age. So you're better off ditching a fund that ranks among the bottom 25 percent of funds with similar investment objectives. Other reasons to sell:

        • Management changes. Just because a fund has changed managers doesn't mean you should sell. A study by Charles Schwab shows that management changes at mediocre funds generally improved performance. And most big fund companies can find a top-rate manager to replace one who leaves.

        But if your manager is the top investor at a small company, consider selling. It's unlikely that the fund company will find another star to replace him.

        If you bought the fund because of the manager, you might also consider leaving. For example, Drew Cupps recently left the red-hot Strong Enterprise fund. Should you go? It depends on whether you bought the fund because of the Cupps factor. “They made him a media star,” Mr. Weitz said. “He's gone now. Either he's important, or he's not.”

        • Taxes. Let's say you bought a technology fund in March. It's now a large smoking hole in your portfolio. You still believe in technology.

        One move: Sell your current fund, take the tax loss, and buy a similar fund the same day.

        • Safety. Ten years ago, you set a goal: You wanted to have $50,000 for your child's college education. Because the stock market has been so strong, you have your $50,000, plus enough to pay your capital gains taxes. Why not sell at least some of your stocks and put them into a money market fund? The interest you earn will be gravy, and you won't have to worry that a downturn will hurt your child's education kitty.

        You shouldn't sell a fund lightly, particularly if you'll owe capital gains taxes when you ditch the fund. But your fund manager won't be selling apples on the street if you do decide to leave. It's your money. If you don't like the results, don't wait for the end of the world before you switch.

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