@Mel: I would say yes it would make sense to sell them. They’ll get the side benefit of writing off up to $3,000 of the losses off of their taxes (and carry forward any extra losses). There are specific rules to follow — that is, the funds they buy cannot look just like the funds they sold. You couldn’t trade an S&P 500 index fund for another S&P 500 index fund. If you wanted to do that, they would have to wait 30 days. Look into the IRS rules for this.

Other than that, I would say any time is a good time to get out of high expense funds and into low expense funds.

Let’s say your fund of choice has an annual expense ratio of 1.5% (and there are many with much higher fees than this), in an average year of equity returns let’s say your fund earns 10% gross (before deduction of fees), that means you’re giving 15% of your total return away.

Finally, the expense ratio is the mandated public display of costs associated with a mutual fund, but it doesn’t tell the whole story.

You must also include the fund’s brokerage costs associated with buying and selling within the fund. These can typically be found buried in a funds SAI (Statement of Additional Information), and curiously, these SAI documents are notoriously buried within a mutual fund company’s website (in my experience.)