I saw some mutual funds have very high return, but the rating was low (3 stars). Who rates them and how? So does that mean high return does not mean high performance? Should I take the rating into consideration? Thanks!
2007-01-30 05:40:50 · 4 answers · asked by Princess 5 in Business & Finance ➔ Investing
I think what I really want to know is how is a high return mutual fund has low rating??
2007-01-30 10:56:30 · update #1
Morningstar is one company that provides ratings generally accepted throughout the financial industry as objective and honest. A Morningstar rating of 5 stars is the best. and 0 is the worst. If you look on www.morningstar.com, you can get free research and explanations of the ratings provided on mutual funds and individual stocks. Morningstar specializes in mutual funds. If you have a rating of 3, I would try to look at the explanation as to why only 3 stars. Is the trend expected to improve, worsen or stay about the same. I would also look at the top 10 holdings in the fund when comparing it to other funds to make sure that you are getting the most bang for your buck. Also, look at the expense ratio to see if there is an upfront sales load. If you are planning to hold the fund for several years, you might be able to avoid the front end load by purchasing B shares. They usually convert to A shares after 5-7 years. A shares generally do not have a back end load.
2007-01-30 05:54:55 · answer #1 · answered by Curious 3 · 0⤊ 1⤋
Like another poster said, morningstar is a great resource for mutual funds. The benefit to using a rating service vs. just the previous total returns over various periods is that the rating service will take into account variables which will most likely be important for the future performance of the fund which obviously is the most important thing....using past returns as the only parameter when choosing a fund has been proven to be a rather poor indicator of a funds future performance.
2007-01-30 06:11:59 · answer #2 · answered by SmittyJ 3 · 0⤊ 0⤋
morningstar is not flawless, but give their ratings some weight as general indication. best to look at past performance over different time frames versus appropriate benchmark (eg S&P, Russell 1000, etc) as well as your own thoughts as to prospects for that type of investment (eg international fund, large growth, etc)
2007-01-30 06:10:29 · answer #3 · answered by jim06744 5 · 0⤊ 0⤋
the ten year track record is the most important to me.
2007-01-30 05:50:36 · answer #4 · answered by golferwhoworks 7 · 1⤊ 0⤋