NEW YORK (CNN/Money) - I own a small-cap stock fund that recently closed to new investors. Is this a good time for me to buy more?

-- Richard Schroeder, Warsaw, Indiana

As anyone who's read this column over the years knows, I'm not the type of financial journalist who believes investors should try to time their moves in and out of the market in general or even particular sectors of the market.

If you have any doubt that such a strategy is usually a loser's game, just look when the big money began flowing into tech mutual funds in the last bull market. You guessed it -- the biggest flows by far came at the end of 1999 and early 2000, just before the sector hit the fan, so to speak.

I believe a much more sensible strategy for building long-term wealth in mutual funds and other investments is to determine an appropriate asset allocation -- that is, how your assets should be divvied up among large- and small-cap stocks, growth and value shares, corporates, munis and Treasury bonds, etc. based on your financial goals, time horizon and tolerance for risk -- and then do your best to keep those proportions intact as you invest new money.

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In other words, let your asset mix be the guide for where to put your money, not factors like how particular sectors of the market have recently fared or which mutual fund managers are getting the biggest headlines in the financial press.

That said, however, if I were to use the closing of a fund as a weather vane for my investing strategy, I would come to the exact opposite conclusion that you have -- I'd be more likely to take the closing as a sign that I should invest less in the fund, not more.

Why? Well, let's step back and think about how funds operate for a minute. Mutual funds make money by charging investors a fee for managing and overseeing the fund. The more assets the fund has, the more money the fund makes. That means there's a strong incentive to keep a fund open, especially when assets are flowing in.

The fact that your fund has shut the doors to new investors appears to be in conflict with the fund's own economic interests. So why would the fund make such a seemingly non-self-serving decision?

You can (and should) ask your fund for yourself. But I suspect the reason is that the fund manager is having trouble identifying small-cap stocks that meet his or her investing criteria. Fact is, small-cap stocks have racked up huge gains over the past year.

Indeed, according to Morningstar, the three main categories of small-cap funds (growth, value and blend) have all returned an average of more than 60 percent over the past year. After that kind of run, it's not uncommon for share-price valuations to get, shall we say, a bit on the blimpish side. Perhaps the manager feels small-caps are simply overvalued. Or maybe the manager just can't find enough shares that he or she likes, given their current prices.

So instead of just taking investors' money and collecting a management fee for holding it in cash instruments, it appears the fund company has decided to shut the doors until the manager can actually do in good conscience what the fund is supposed to do -- buy small-cap stocks that meet the fund's selection criteria.

Indeed, the fact that a fund is willing to refuse money from new investors is generally taken as a sign that the fund company is shareholder friendly. Instead of increasing its management fees by continuing to rake in the dough and either hold the new money in cash or buy stocks the manager doesn't really like, the fund company has decided to stick by its stock-selection criteria -- even if it means giving up giving up some management fees.

Which leads to a logical question: if the fund has decided, in effect, to step back from the small-cap market, shouldn't you do the same? I'd say not necessarily.

A fund, or at least a good one, should have a very specific stock-selection strategy with specific criteria that determine what stocks the fund should buy. If the manager can't find stocks that meet those criteria, the fund shouldn't be investing. Doing so would, in effect, mislead investors.

But, as I mentioned earlier, you should be using your asset mix as a guide. So as long as the small-cap portion of your portfolio hasn't grown to the point where it's way out of proportion to where it should be, then I'd keep investing in the fund.

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Of course, it may very well be the case that rising small-cap-stock prices have increased the value of the small-cap portion of your portfolio so much that it is out of whack (although that's less likely if you follow my advice and rebalance your portfolio at the end of each year). And if that's the case, then you may want to hold off putting more money in the fund.

But in that case, you would be making an asset allocation decision based on the balance of risk and reward in your portfolio, not a market timing decision based on some guesstimate of how you think small-cap stocks might fare in the near future. To me, that distinction reflects the difference between smart long-term investing and speculation.

Walter Updegrave is a senior editor at MONEY Magazine and is the author of "Investing for the Financially Challenged." He also answers viewers' questions on CNNfn's Money & Markets at 4:40 PM on Mondays.