1. Is the rating of mutual funds important?
2. Why does high-return mutual fund come with low rating?
Thanks!
2007-01-31 07:13:03 · 4 answers · asked by Princess 5 in Business & Finance ➔ Investing
Ratings are important, but can be misleading. The ratings compare each fund to other funds in the same category.
I believe strongly that past performance is an important indicator of future results. The morningstar rating system places very large portion of their rating on the most recent year. I do not like this system. The reason they do this is because many funds will change their manager on a regular basis. I prefer funds with experienced managers that have managed the fund at least 5 years. 10 year numbers are also important now becuase they show results over strong periods of growth and decline.
Another problem with the ratings assume the fund has been placed properly in a category with similar funds. This is not always the case. For example, there is a fund NEWFX that is considered an emrging market fund. However, it only invests 35% to 40% in emerging market stocks. For the last 5 years, EM has been very strong performers. This has hurt the ranking of this fund even though it takes a lot less risk than the other funds in this category.
2007-01-31 07:31:08 · answer #1 · answered by MR MONEY 3 · 1⤊ 0⤋
Depends on who is doing the rating? You can get ratings from your brother in law or morningstar.com. Whoever it is, rate things on different critera. Funds that show a high return may be to market forces in play that are temporary at best and may not have a high rating currently because things the fund invest in may be playing out. Do your homework!
2007-01-31 18:59:54 · answer #2 · answered by philsky 2 · 0⤊ 0⤋
www.morningstar.com - that's what many professionals use.
They review the funds, their internal expenses and the manager. The low rating may be cause they take lots of risk, they have high internal fees or their return isn't compensatory with the risk.
We like non-load funds because more of your money is working for you instead of a broker. Watch out for the internal fees, commissions going in and back-end commissions. You can loose lots of your investment that way.
2007-01-31 15:22:35 · answer #3 · answered by Dizney 5 · 0⤊ 0⤋
www.morningstar.com
Yes, ratings are important.
2007-01-31 15:18:44 · answer #4 · answered by Anonymous · 1⤊ 0⤋