Mutual funds are supposed to be buy-to-hold investments, and if you choose them intelligently -- perhaps by perusing the recommendations I make each month in the pages of Champion Funds -- they generally are. Still, it's never safe to assume that any investment is a now-and-always proposition. Sometimes, you gotta know when to fold 'em.

To be sure, it's absolutely critical to consider the tax implications of selling shares of any mutual fund. But once you've done that math, here are three key reasons to consider parting ways with a fund you hold.

1. Management change
There's nothing inherently magical about a mutual fund. The thing can only be as strong as the guy whose job it is to pick the stocks. For that reason, when you go fund shopping, you should focus on the manager's track record and try not to get stars in your eyes. Helpful though it can be, Morningstar's star rating is a purely mathematical, backward-looking measurement. And while a five-star track record might look impressive in a glossy brochure or television commercial, the manager who's responsible for that record may no longer be on the case.

By the same logic, when the fund manager you've researched and signed up for decides to head for the exits, you should consider doing exactly the same thing. At the very least, you should certainly subject Mr. New Guy to the third degree. What's his background? Has he been successful at other mutual funds? Were those funds at all similar to the one he's now heading up?

If you're not happy with the answers to those, um, fundamental questions, you should consider selling your position in the fund. There are literally thousands of others to choose from, and you're sure to find among them a worthy replacement that's headed up by a more proven manager. Who knows? Perhaps even one of 'em is being run by Mr. Old Guy.

2. Underperformance
Poor short-term performance is no reason to sell a fund. If anything, it might be a good reason to buy additional shares. If a talented small-cap money manager is losing out to the S&P 500, for instance, that may be because the big boys -- you know, such S&P heavyweights as Microsoft (NASDAQ:MSFT), Pfizer (NYSE:PFE), Wal-Mart (NYSE:WMT), and Coca-Cola (NYSE:KO) -- are outperforming the little guys. And even if that same manager is trailing an index that's a better proxy for his area of the market (the Russell 2000, say), it may be because he's going against the grain and looking to snap up shares of the names he likes while they're temporarily out of style with investors.

If, however, a fund persists in its lagging ways over the longer term, that's a good reason to think about selling. Anything over three years is worth looking at, and if your fund looks like a dog relative to its peer group and broader market indexes over five years, finding a sturdier pick is most likely a good way to go.

3. Outperformance
If selling on longer-term underperformance is a bit of a no-brainer, deciding to sell during a fund's protracted hot streak might make some folks think that you really don't have a brain. They'd be wrong, however: Savvy fund investors should at least consider paring back their hottest properties if they've been racing along over that same three- to five-year period.

Why so? Well, while stock picking is a fund manager's, um, stock in trade, a part of any fund's success almost certainly owes to its style -- i.e., where it falls on the market-cap and growth/value spectrums. For instance, small-cap value stocks have shellacked large-cap growth rivals over the last five years, a dynamic that has whipped up a stylistic headwind for even the most talented large-cap managers.

Hot areas of the market eventually cool off, however, as investors start to find their valuations too rich. Indeed, not for nothing has many a fine small-cap fund closed to new money this year. Their managers are having a difficult time finding compelling ways to put new investment dollars to work.

That's not necessarily an argument for liquidating your position in the fund, but if it's been on a protracted winning streak, you should at least consider sending new investment dollars elsewhere. On a relative basis, for example, large-cap growth funds -- which invest in such companies as Yahoo! (NASDAQ:YHOO), Qualcomm (NASDAQ:QCOM), and eBay (NASDAQ:EBAY) -- look like an undervalued category just now. Moreover, given the lengthy duration of the rally in small caps, you may find that your overall portfolio has drifted down the market-cap scale -- and far away from the asset allocation you've settled on. If so, that's an important reason to consider paring back your position, too, perhaps the most important of all.

There are other compelling reasons to consider selling a mutual fund, of course, and I'll be back next week with two more of them. Stay tuned.

Shannon Zimmerman, Motley Fool Champion Funds analyst, knows when to hold 'em -- and when to fold 'em. He doesn't own any of the securities mentioned. The Motley Fool is investors writing for investors.