I have roughly equal investments across 4 different high-risk "growth" mutual funds -- let's just assume that other than all being high risk, they're fairly well diversified. Two of the funds are performing well (5-10% growth since purchase), and two are performing poorly (5-10% loss since purchase). So in total, the net gain/loss has been about zero.

Unexpectedly, I need to liquidate half of the investment earlier than I'd originally intended, so I'm forced with a choice of which investments to keep and which to sell.

Is it better to:

  1. Sell the well-performing ones! That way I'm not locking in losses from the under-performers.
  2. Sell the under-performing ones! That way the good performers can keep gaining.
  3. Sell a mix of all 4! Keep the investment "diversified".
  4. Do more research: make a bet on the specific sectors the mutual funds cover and either accept losses or keep the growers.
  5. It doesn't matter, it's just gambling!

If it helps: my investment style is generally comfortable with risk and a long time-horizon (present cash need excluded), but generally no interest in active micro-managing investments or intensive market research (hence the choice of mutual funds).

  • 5
    Have you held all of them for more than a year?
    – Hart CO
    Commented Jul 3, 2023 at 21:53
  • 7
    Your title says "stocks", the question says "mutual funds". There's a big difference!
    – Barmar
    Commented Jul 4, 2023 at 14:26
  • 1
    Taxes and what you're buying with it seems the most important considerations.
    – user26460
    Commented Jul 4, 2023 at 15:01
  • 1
    @HartCO: Yes, more than a year (about 1.5 years total).
    – user85461
    Commented Jul 5, 2023 at 14:21
  • 1
    @Barmar: good point, they're mutual funds, not stocks.
    – user85461
    Commented Jul 5, 2023 at 14:21

6 Answers 6


In most situations it doesn't matter, but not because it is gambling. The only reason it would matter is if you had a bump in income and are expecting a higher marginal tax bracket in the year you sell. Then maybe it makes sense to sell the ones with the least gains.

Aside from that, the only thing that matters is what you think each stock will do in the FUTURE, not the past. Would you buy each of these stocks at today's prices. That's what you are doing when you keep them. If the answer is no you should sell, regardless of how much gain/loss you have.

"Locking in" is just a game you play in your head that is rooted to the sunk cost fallacy.

  • 16
    Yup, that "sunk cost fallacy" is one of those dumb emotional decisions that'll getcha. Commented Jul 3, 2023 at 22:16
  • 4
    The tax implications of selling a loss or realizing gains could be relevant in several jurisdictions though.
    – Hobbamok
    Commented Jul 4, 2023 at 16:57
  • 3
    @Hobbamok True, and the emphasis on this answer is that you focus on facts (calculating gains) and not speculating on whether it goes up and down, because those are not facts.
    – Nelson
    Commented Jul 5, 2023 at 6:48
  • 2
    "Aside from that, the only thing that matters is what you think each stock will do in the FUTURE, not the past." - but what basis does OP have for holding any such beliefs in particular? That seems to be specifically what the question is about, after all. Commented Jul 5, 2023 at 20:54
  • 1
    @KarlKnechtel: There are plenty of reasons that outlook of a certain investment changes. The outlook is an expectation conditioned on available information. Increase the information, the expectation changes. In addition to that, OP's appetite for risk may now be different from when they chose the investment.
    – Ben Voigt
    Commented Jul 6, 2023 at 19:55

Looking at past performance of stocks when making decisions is a common fallacy in stock investment. Past performance is irrelevant. All that matters is whether you expect the stock to raise or fall in the future.

So when you consider which positions to liquidate, the question you should ask yourself is: "If I didn't own this stock already, would I buy it today?" When the answer is yes, you should keep it. When the answer is no, you should sell it.

With managed funds, if they consistently failed to beat the market in the past years, then that might be a sign that it's a poorly managed fund. Which could be a reason not to buy them. But that does not necessarily need to be the case. For example, it might be a fund that specialized in a specific niche industry that didn't perform too well in the past, but you have reason to believe that they could perform better in the future. Which would be a reason to buy it today.

  • 4
    You say "Past performance is irrelevant", but then you go on to explain how past performance is relevant... ?
    – NotThatGuy
    Commented Jul 5, 2023 at 13:38
  • 2
    @NotThatGuy ...and then I am again saying it might not be relevant after all. I know it's confusing, but only a sith deals in absolutes.
    – Philipp
    Commented Jul 5, 2023 at 13:40
  • I'm not sure this is accurate. I often continue to own stocks that I wouldn't buy today, because I don't want more exposure to the risk of that particular stock than I already have - I have already put my maximum number of eggs in that basket. I might think it will probably go up, but not want to lose 100% of my money if I'm wrong. This "would you buy it today" thing is for investors with infinite money. Commented Jul 6, 2023 at 20:06
  • 1
    Ok, @user253751: f you sold it, what would you buy? If the answer is "the same thing", don't sell it. Don't sell unless you need the money or can buy something better; if you need the money, sell the one you wouldn't buy again if you didn't need the money..
    – keshlam
    Commented Jul 14, 2023 at 1:33

Sell the ones with the high expense ratios

Knowledge of past performance, plus $9, gets you a small coffee at Starbucks but it certainly doesn't tell you a thing about future performance.

However, you don't need a crystal ball to predict the guaranteed total loss you're taking from expense ratio, loads, and other fees.


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  • 5
    This seems a bit like saying if you want to gamble, or open a bank account, you should always go with whatever has the lowest fees. That is an important consideration, but if gambling odds are heavily against you (and the payout isn't proportional), a low fee wouldn't make up for that, and a bank account may have higher fixed interest or other benefits to balance out higher fees. I tend to prioritise investments with low fees, not because that's my primary consideration, but rather because higher fees doesn't typically seem to lead to higher returns.
    – NotThatGuy
    Commented Jul 5, 2023 at 13:33
  • 2
    @NotThatGuy Well endowment managers will argue the second one I linked isn't gambling for a sufficiently long planning horizon. But yes, you have a point: if you are gambling at a large enough scale for the laws of large numbers to remove chance, then choose the game with the lowest house edge. And index mutual funds count as "scale" because you buy many companies. Commented Jul 6, 2023 at 2:25

None of the circumstances you mentioned affect the answer, which always is: consult your investment policy statement as to the asset allocation that best matches your goals, and buy and sell as appropriate to reach it. Tax considerations are secondary to actually owning what you need to own.


Know what your target mix (typically expressed as percentages assigned to large stock, small stock, bond, international, "income producing") is. Rebalance to maintain that target mix.

Within each of those categories, generally don't sell anything unless you either need cash or see something in that category that you are convinced will perform better than the one you are selling, and you get the best improvement by selling the one you think will perform worst.

Note that this is "believe will perform", not "know has performed." The latter may help shape your beliefs about the former, but is not the sole deciding factor and often not the primary deciding factor.

Note too that there is nothing wrong with just sitting on a single set of investments if you're happy with them and expect them to perform well.

Yes, if you are looking at mutual funds, expense ratio subtracts directly from your gains. Which is one reason index funds do so well; their expenses are often a tenth or less of what actively managed funds charge and the latter don't do sufficiently better to balance that.


Sell the underperforming ones.

  1. This makes sense for tax reasons. You have no realized gains that you need to pay taxes on. So need to sell less. Else you'd need to sell enough to cover your cost and the tax expense.

  2. Past performance is no indicator or future performance. But cutting losers and letting winners run is pretty basic advice that even Malkiel (Random walk down wall street) recommends. It goes against the intuition to lock in gains, but is simply the sensible thing to do.

  • Can you explain why you think cutting losers and letting winners run is a good idea? Commented Jul 4, 2023 at 12:16
  • 1
    @TannerSwett Past performance is no indicator of future performance in theory. However, bad past performance can be a symptom of seriously incompetent management (not too likely) or excessive fees (quite likely), either of which makes an investment not worth keeping.
    – TooTea
    Commented Jul 4, 2023 at 13:52
  • 3
    @TooTea: That's not even what the theory says. Past performance is one of the stronger indicators of future returns... it's just not as strong as hopeful investors like to believe, which is why the advice is always to trust it less. But that's not the same as zero.
    – Ben Voigt
    Commented Jul 4, 2023 at 14:13
  • @TannerSwett Except for specialized industry funds, whose performance is dependent more on outside factors than the manager's decisions, it's probably the best predictor we have.
    – Barmar
    Commented Jul 4, 2023 at 14:30
  • 1
    Regarding 1: This depends if OPs jurisdiction has for example a yearly tax-free capital gains range or similar (in which case "using up" that range from the winning stock would make sense), or may allow a summation of gains and losses, in which case selling a bit of both to get to 0-gains tax wise
    – Hobbamok
    Commented Jul 4, 2023 at 16:59

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