Rating Mutual Funds – Helping You Choose
Choosing a mutual fund can be a daunting task. Websites that specialize in rating mutual funds can provide valuable insight and advice to help steer you to the right choice.
There are many websites that provide information that is helpful in researching mutual funds. Probably the most well known is Morningstar.
Morningstar provides a great deal of information about mutual funds as well as a number of other types of investments, such as exchange traded funds, individual stocks, and options.
Morningstar’s mutual fund rating system is comprised of rankings that correspond to a number of stars, with five stars being the best and one being the worst. The star ranking system is purely objective, based on a mathematical analysis of past performance. The analysis takes into consideration risk as well as sales charges for the funds.
Based on this criteria, funds in the top 10% receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars, and the last 10% receive one star. These ratings compare similar funds within each Morningstar category.
The ratings are based on past performance and they should only be used as a starting point for evaluating funds.
Another tool that Morningstar provides for evaluating mutual funds is a fund screener. The fund screener allows you to input various search criteria such as fund group, category, manager tenure, minimum purchase, ratings, etc. to provide a list of funds to examine more closely.
When you do find a fund that you want to look at more closely, Morningstar provides detailed data about the fund, including charts, information on performance, holdings, risk, asset allocations, investing style, and distributions. Analyst reviews are also available for a fee.
Another website that is useful when evaluating mutual funds is
It has many tools that are similar to Morningstar. One feature from Yahoo that I really like is the charting tool. It is very flexible and even allows you to compare one mutual fund to other mutual funds, stocks, or indexes for various time frames.
These are just a couple of the many websites that are useful in rating mutual funds. In addition to researching funds online, be sure to read a mutual fund’s prospectus before investing.
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