Excerpted from Bogle on Mutual Funds by John C. Bogle, page 290

Mutual funds should be bought to be held. It is hard to imagine why so many investors engage in the frequent shuffling of the mutual funds they own and even harder to imagine that their returns are enhanced by doing so. Nonetheless, there are times when you should adjust your portfolio, even if you are a long-term investor.

• When a particular type of equity fund consistently underperforms its carefully selected peers. To each his own as to the amount of time that should be allowed to elapse before taking action, but I suggest that one or two years of unexplained and dramatic underperformance or four or five consecutive years of marginal underperformance are generally appropriate indicators. If your fund's performance does not meet the criteria I discussed in my summary in Chapter 4 for a sustained period, the fund should be liquidated and replaced with one that does.

• When a fund changes its objectives or policies. If you have selected, for example, a balanced fund that subsequently becomes a bond fund, it is time for a change. If your fund radically changes its traditional portfolio turnover policy, it may be time for a change. Substantial modifications of any of the criteria that were material factors in your initial selection of the fund are also grounds for divorce.

• When a fund's expense ratio rises significantly. Particularly in bond, balanced, and money market funds, an increase in fees to the manager represents a reduction of income to you and is highly unlikely to be offset by enhanced capital return. Conversely, you should be alert to new low-cost opportunities that may emerge as the industry becomes more price competitive, and should move to a new fund if cost is likely to be a principal factor in determining its performance.

• When your investment objectives change. Obviously, as you move through your investment life cycle, changes in asset allocation are required. In this case, while the specific types of funds may change, you may well wish to remain in the same fund family if its funds have earned your respect in the past.

Such circumstances should be regarded as the exceptions rather than the rule. If the funds are soundly selected and then consistently managed by the adviser, a bit of inertia on your part may go a long way toward your enjoyment of productive investment returns.