The most important reason for selling a fund is the same as the reason for buying it your investment goal. You should buy or sell funds solely on the basis of how they contribute to your long-term financial goal. Your changing needs and feelings can drive a sell decision. Someone approaching retirement may wish to sell aggressive funds and put the money into more conservative investments. Sometimes it's time to sell a fund simply because you need the cash.
Taxes can provide another motive.
Sometimes, taking a loss on a fund and switching to another can let the government share in the loss by providing an income tax deduction. And it may be appropriate occasionally to correct for past over-zealousness. Sell when you just can't take it anymore. The point of investing is meeting financial goals, not developing ulcers. If your fund is so volatile that not even the vision of your brand new house calms you down, then by all means sell as long as you'd never buy the fund back again.