While my Champion Funds newsletter service focuses squarely on finding the right funds for the long haul, savvy investors know that selling has to be part of the game plan, too. Last week, we took a look at three good reasons shareholders should consider parting ways with a fund they hold. This week, as promised, we're back with two more. Do we cover all the bases or what?

1. Intelligent asset allocation
If I could offer fund investors only one piece of advice, it would be this: Before investing in any fund, consider the impact that investment will have on your portfolio's overall asset allocation strategy. If, for instance, you've decided to build your fund investments around a solid large-cap pick that tilts toward value-priced securities, you should think twice about that hot little small-growth number you've got your eye on. That's certainly not to say that you shouldn't invest in the fund -- many if not most investors will want exposure to that area of the market, too. Still, before you take the plunge, you should ensure that investing in the fund won't tip your portfolio away from the asset allocation you've targeted.

By the same token, fund investors should avoid "retrofitting" their portfolios. Making changes to your asset allocation simply because Mr. Hot Shot Money Manager is rolling out, say, a hot new biotech fund -- one that invests in the likes of Genentech (NYSE:DNA), Gilead Sciences (NASDAQ:GILD), and Amgen (NASDAQ:AMGN) -- is almost never the way to go. Indeed, that way usually includes the dreaded "whipsaw" treatment. Why so? Well, all too often, fund investors go chasing last year's outperformers only to find that, alas, they're also last year's models. "Hot" areas of the market eventually cool off, after all, in part because their valuations become less attractive relative to the market's cooler spots.

Still, if sticking with the asset-allocation plan that brung you is a good way of avoiding the temptation to chase performance, a solid plan will also let you know when it may be time to sell fund shares. I'm not a "rebalancing" obsessive, and any decision to sell should be made with the potential tax hit you'll take in mind. That said, fund investors should review their holdings every year and see how they stack up compared with their blueprint. If, owing to the impressive rally in small-cap stocks, your allocation to small-cap funds takes up a larger slice of your portfolio's pie than you'd planned on, for instance, that's a terrific reason to think about selling some of your small-cap shares.

At the very least, you should consider directing new investment dollars toward those funds that will help you achieve the allocation you've targeted. You may even find that you can do that on the cheap. Large-cap growth funds -- which invest in such companies as Dell (NASDAQ:DELL), eBay (NASDAQ:EBAY), Yahoo! (NASDAQ:YHOO), and Maxim Integrated (NASDAQ:MXIM) -- have been in the relative doldrums for some time now. To the extent that that portion of your portfolio is looking a bit thin these days, now may be a fine time to -- as the pros like to say -- harvest some gains from your smaller fish and, to mix my metaphors just a wee bit, drop your line further up the market-cap food chain.

There's one last important point to make here, though: The perfect portfolio is always a work in progress, one that you'll need to tweak over time as retirement or big-ticket near-term goals (such as buying a house) arise. Making those adjustments will likely require selling, too, and an intelligent asset-allocation game plan will help you do that, well, intelligently.

2. Ethical taint
It's been a little more than a year since news of trading abuses rocked the buttoned-down world of mutual funds. During that time, some shops have made great strides. Heads have rolled -- including those of senior corporate officials -- and New York Attorney General Eliot Spitzer, bless him, has even wrung fee reductions out of a fistful of fund companies.

I've taken a hard line on the shops that were implicated in the scandal, but, heck, even I'll admit that enough time has passed for us to begin separating the wheat from the chaff.

Trouble is, there's still a lot of chaff out there. And if you're holding shares of a fund that's offered by a company that's been tight-lipped about its involvement in the scandal or, worse, hasn't done much to change its corporate culture, you should weigh the tax impact and consider selling your shares. When it comes to mutual funds, it's a buyer's market. There are literally thousands of competitors out there vying for your hard-earned investment dollars -- and most of them haven't abused your trust and their fiduciary duties.

Of course, just being free of ethical taint isn't a sufficient reason to buy a fund. Savvy fund investors should also be on the lookout for a talented manager with a successful long-term track record, a low price tag, and a sensible stock-picking strategy. And if you find a fund whose manager "eats his own cooking" by investing right alongside you, well, so much the better.

Not coincidentally, those are exactly the kinds of funds that I zero in on each month in the pages of Champion Funds. A costs-you-nothing free trial is just a click away.

Shannon Zimmerman, chief analyst for Motley Fool Champion Funds, knows that parting isn't always such sweet sorrow, particularly when it comes to mutual funds. Shannon doesn't own any of the securities mentioned. The Motley Fool is investors writingfor investors.