The media has no trouble telling you what funds to buy and when, but finding advice on when to cut a fund loose is much harder to come by.

Sometimes parting with a mutual fund can be a difficult task. Other times it can be quite easy. More often than not, investors tend to sell their mutual fund holdings for the wrong reasons. So before you make a hasty decision, please read the following list of the correct reasons to sell a mutual fund investment:

You Need the Money
Sometimes there will be circumstances in your life when you must sell your investments. It is important for you to weigh out alternatives to selling your investments because it could really hurt you in the long term

You may be able to get a loan or borrow the money. If you can get a rate lower than your expected returns on your investment, it might be best to hold off on selling your investments.

Your Situation Has Changed
If you are at a different stage in your life, you may want to consider selling your fund. As you near retirement, you may want to consider more conservative funds. If you get married, you may need to compromise your risk tolerance and desired returns with that of your spouse.

The Fund Has Changed Its Style or Objective
It is important to consider your original reason for buying a fund. If you bought a small cap fund to help diversify your portfolio, but you notice that it is investing in large blue-chip companies, then you should consider selling that fund.

The Fund is Underperforming
This reason for selling, although valid in certain conditions, is where most investors make a mistake. When calculating performance don't look at too short of a period and don't compare apples to oranges.

It is important to base your decision on relative performance not absolute performance. When your fund is down 5% while other funds or the market in general are up 10%, it is very tempting to switch over to what is "hot." This is called "Chasing Performance" and is the best way to shoot yourself in the foot.

When studying relative performance, you look at your fund and compare it to its peers. If your fund is a utility fund, you should not be comparing it to the S&P 500. When choosing a benchmark, you must select funds in the same category (asset class). If your utility fund was down 2% and you found out that the average utility fund was down 4%, then this is not a good enough reason to sell it. It helps to compare your fund to its peers by looking at the 1-year, 3-year, and 5-year performance. If it has underperformed the average of its peers in all cases, then you have good reason to sell your fund.

The Fund Manager Has Changed
A simple change of fund managers, in itself, is not enough reason to sell a fund on a short-term basis. If it is a passively managed fund (index fund), then you have little to no reason to worry. If it is an actively managed fund, then you should keep on eye on the new manager. Give the new manager a few years before you decide to cut them off. Believe it or not, there are plenty of quality fund managers to replace your manager no matter how good he or she was.

The Fund Size Has Changed
Sometimes size does matter! One great example is a small cap fund. A small cap fund manager may be great at picking small company stocks and their success can often lead to their failure. Here is an example:

Fund Manager Joe is great at picking a portfolio of 30 small company stocks. His success brings a lot of attention to his fund in the media, resulting in a large increase in assets in his fund. The problem is that he now has such a large amount of money to dump into these small stocks that he may end up owning 10% of a particular stock, which leads to liquidity problems (because his fund becomes a major shareholder of the stock). To get around this problem, he has to hold more stocks. It was tough enough for him to pick 30 quality companies, but now he is forced to find 50 or 60.

The Fund's Expense Ratio Rises
A small rise in an expense ratio is not a big deal, but when you see a significant rise you may want to consider selling the fund. In the case of bond funds or money market funds, it is highly unlikely that the fund can increase its returns enough to justify an increase in the fund's expenses. Remember, these expenses only subtract from your returns.

If you were considering selling your fund and the primary reason for selling it was not on the list, you may want to reconsider