MUTUAL FUND RATINGS

Need a quick-and-dirty opinion on a fund? Get familiar with mutual funds ratings. It's important to know how a fund has performed before investing in it.

Now that we’ve covered how to buy and sell mutual funds, let’s talk about mutual fund ratings and how they’re calculated.

What are mutual fund ratings?

Mutual fund ratings assess how the fund has performed over a period of time. The ratings are obviously helpful and important to investors – they allow them to get a quick opinion on a fund within minutes. Rating agencies keep fund managers on their toes and provide a super valuable service to customers.

Mutual fund ratings providers help keep fund companies honest by providing reviews on mutual fund boards, looking at the backgrounds of portfolio managers, detailing whether a fund is remaining true to its investment style, etc.

How mutual fund ratings are calculated

These are the two biggest fund-rating systems:

The Morningstar Rating System

Morningstar uses a ranked system with stars as the rating standard. The system presents breakdowns for equity funds into 12 industry groups inside three primary economic sectors to compare weighting decisions.

The Lipper Rating System

Lipper provides mutual and hedge fund reviews as well as commentary and tools for analyzing data. Lipper services the institutional and asset management industry, but its mutual fund services are still provided in detail for retail investors of all levels. Lipper Leaders, the rating system, covers 80,000+ funds. It uses a numbered rating system from 1 to 5; based on consistency, capital preservation, peer performance and expense management, etc.

Disadvantage of Mutual Fund Ratings

It’s easy to fall into the “performance trap” by blindly chasing performance. Past mutual fund returns are really not a great indicator of future performance. It’s also important to be weary of the herd mentality that often comes with mutual fund investing.

During volatile market times, mutual funds managers are susceptible to any temptation to try to increase performance. They may also attempt to protect themselves against downside risk. Both of these factors can lead to rogue trading – or even fraud.

Selecting mutual funds and reading their ratings can be pretty overwhelming – we know. We’ve got you covered. Our Putting Your Money in the Market course will teach you everything you need to know about picking mutual funds.

Important Reminder!

The Motley Fool Stock Advisor ranks as our #1 Best Investment Newsletter for the third year in a row.

Their stock recommendations continue to beat all of the other newsletters that we follow and they maintain a very high accuracy of their picks. Their 24 stock picks from 2018 have outperformed the market by an average of 44% as of October 12, 2019. Read that again. I didn’t say their stock picks are up an average of 44%, I said they have BEAT THE MARKET by 44%.

No other newsletter comes close to that. You may have seen the Motley Fool’ advertisements that their picks are up 367% compared to the market’s 80%. Is The Motley Fool’s Stock Advisor really as good as they claim?

Our results, at least since January 2016, suggest YES. You can now get their next stock picks in real-time for ONLY $19. You will also receive their list of the TOP 10 Stocks to Buy Right Now.  This special pricing is for NEW customers only and you must click on this link to get the special price..

Get the Motley Fool's Next Stock Picks for $19

P.S. this offer is still backed by their 30-day money back guarantee