Your Mutual Fund Manager Left: Is It Time to Move on?

Your fund manager may have been responsible for large gains in your mutual fund overtime. If this is the case, it is not a surprise the manager was swept away by another firm in what is a very competitive job market. Your initial reaction may be to jump ship and go along with your fund manager. This type of loyalty is what the new fund is counting on, and they will try to profit on your change. Instead of leaving your current mutual fund immediately, observe the fund for some time before making a decision.

Expense of Switching Funds

If you sell your mutual fund stake to follow your old fund manager, you will have to pay sales fees and expenses to the new mutual fund. These fees may be highest as the manager came on board. His or her prowess with your existing fund will carry with it many interested purchasers looking to get a piece of the new mutual fund. Furthermore, your old manager may have some changes to make to the new mutual fund. If the manager takes the fund in a new direction, the members of the mutual fund may have to absorb some of the costs of unloading multiple stocks and purchasing new ones for long-term gain.

Watching Your Current Fund

A new manager will be announced for your current mutual funds, and you need to pay close attention. Does his style match your investment style? Does she embody the qualities you liked in your old manager? Has the fund stayed with its initial style over time, despite many changes in managers? You may come to realize there is no large difference between the mutual fund controlled by your old manager and the one under new management. Most quality firms will make selections based on similar criteria across the board. They will select a manager that is completely capable of steering the fund in a successful direction. However, if the manager starts to change pace quickly, dumping off stocks and drifting the style of the fund, this may be a sign you should consider leaving the firm. The cost of completely changing the direction of your existing fund can be as high as the cost to follow your manager to a new fund.

Seeking Unbiased Advice

Ultimately, the decision of what to do is yours alone. However, there are qualified minds that you can ask to help in your decision. If you used a financial adviser to pick your current fund, talk to this adviser about the change. You may have an IRA administrator who helps direct your investments, an accountant who works with you on tax planning and other financial planners. Speak with them about the style of mutual fund you are attracted to, and ask if they feel your mutual fund is a good match even under the new management. Using this advice and your own judgment, you will likely get a straight answer as to the best course of action in the future.

blog comments powered by Disqus