I've got a Roth IRA with about $5,000 in the (OAKSX) Oakmark Small Cap fund. I'm 28 years old. Should I drop this fund and accept a loss or hope that it will eventually pay dividends and go up in value? -- Jay Meeks


You have invested your Roth IRA money in a narrow part of the market -- one that has performed miserably over the past few years. In recent history, your Oakmark fund has actually performed worse than the average small-cap fund. Its one-year return of negative 23.2% (through last Thursday) trails its peer group average of negative 14.5%, according to



I don't know if you have other investments in different areas of the market -- either in the IRA or out. But if this is your only investment, you should think about taking the following steps.

Don't confine all your money to small-cap stocks. There is nothing wrong with having some of your assets in the group, but consider spreading your money around.

First, broaden your exposure to include well-established, large-cap stocks. "You want to develop a core holding," says Ron Roge of

R.W. Roge & Co.

in Bohemia, N.Y. Roge suggests keeping about 70% of your assets in large-caps.

You can find this type of investment in a broad-based actively managed fund or an index fund. You can easily find a suitable fund at any large fund company, such as

T. Rowe Price



. (Oakmark's flagship fund is a value fund, which might not give you the broad exposure to growth and value you're looking for.)

In the realm of indexing, a total stock-market fund, like the

(VTSMX) - Get Report

Vanguard Total Stock Market Index fund, will not only give you coverage to an array of large-cap stocks, but it will also provide exposure to small-caps. A fund of this scope will also cover growth and value. (You can read my previous

column on

S&P 500

funds vs. total stock-market funds.)

This reallocation of your assets would mean selling a portion of your existing investment in this Oakmark fund. "If you aren't going to add more money in the near term, you should sell a portion to take on a new position," says Daniel Roe, a financial planner with

Budros & Ruhlin

in Columbus, Ohio.

Unfortunately, you won't be able to use any realized loss to offset any gains. Because the money is in an IRA, you will just have to eat any loss you realize. But don't let that discourage you from putting money in an IRA. "Get as much money

as you can in the Roth because it offers tax-free growth," says Roe.

All this is not to say you should abandon investing in these narrower, sexier areas of the market. But think about building this core large-cap position first. As your portfolio gets larger and you gain broad exposure to the market,


you can focus on investing in specialist managers or in specific sectors.

For more on buying and selling mutual funds, read


Contributing Editor Brenda Buttner's

guide to fund investing.

Send all your questions and comments to

fundforum@thestreet.com, and include your full name.

TSC Fund Forum aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.