Time to sweep out poorly performing mutual funds

— -- Pretty soon, you'll be getting a quarterly letter from your fund manager, bragging about how well he has done this year. He'll talk about all the great stocks in the portfolio. He'll promise to do his very best for you.

You might want to dump him anyway.

The fund industry is fond of promoting long-term investing — which is, indeed, a virtue. But there's no reason to be a long-term investor in a rotten fund, or in a fund that no longer suits your needs. And you can get significant tax benefits from selling a losing fund.

So pull out your fund statements. Grab a quart of Cherry Garcia and some tissues. It may be time to bid your fund goodbye. Fortunately, there are plenty of other fish in the mutual fund sea.

The average stock fund has jumped 21.6% this year, and 55% since the Standard & Poor's 500-stock index bottomed on March 9. That's pretty good.

But we're not talking about the average fund. We're talking about your fund. And when you have your choice of more than 4,300 U.S. stock funds, there's no need to settle for losers.

You shouldn't fire a fund manager if he lags behind other, similar funds for six months, or even a year. Even great managers have their off periods.

But many fund companies will fire a manager if he lags behind his competition for three years or longer. You should, too.

The funds in the chart have lagged behind their peers for the past one, three and five years, which is reason enough to sell them. But they also have another strike against them: above-average expenses.

Every fund charges expenses to pay for its operations: postage, rent, salaries and the like. But those expenses are a drag on performance. Most managers can't beat the S&P 500 by even half a percentage point a year. The job is far harder when the fund is taking 1.5 percentage points or more for expenses.

Over the long term, fees slash your returns. Consider two funds, each of which averages an 8% gain each year. Fund A charges 0.75% a year. Fund B charges 1.5% a year. A $10,000 investment in Fund A will grow to $81,643 in 30 years. Fund B will grow to $66,144, about 20% less.