Should I switch out of a good mutual fund if it underperforms for 1–2 years?
Published 19 September 2026
If a fund that used to perform well starts lagging its benchmark or other funds for a year or two, how do I know whether I should stay or switch to a better-performing fund?
Even a good long-term fund can go through periods of underperformance, sometimes for years.
During that period, another fund, sector or investing style may look much more attractive.
The risk is that you exit the original fund during its weak phase and move into the fund that has just performed well.
The original fund may later recover and compound, but you are no longer invested in it.
Recent underperformance alone does not tell you whether the long-term strategy has stopped working.
“Even a great long-term fund would have gone through periods of underperformance. Sometimes years of underperformance.”
“Over time, the original fund gradually recovers and compounds. But the investor is no longer there.”
This is not personalized investment advice. Your goals, risk tolerance and financial situation may be different, so assess your own situation and discuss it with your financial advisor.
During that period, another fund, sector or investing style may look much more attractive.
The risk is that you exit the original fund during its weak phase and move into the fund that has just performed well.
The original fund may later recover and compound, but you are no longer invested in it.
Recent underperformance alone does not tell you whether the long-term strategy has stopped working.
“Even a great long-term fund would have gone through periods of underperformance. Sometimes years of underperformance.”
“Over time, the original fund gradually recovers and compounds. But the investor is no longer there.”
This is not personalized investment advice. Your goals, risk tolerance and financial situation may be different, so assess your own situation and discuss it with your financial advisor.