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.

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The Best Stock Newsletters as of June 29, 2025

Ranking of Top Stock Newsletters Based on Last 3 Years of Stock Picks

We are paid subscribers to dozens of stock newsletters. We actively track every recommendation from all of these services, calculate performance, and share the results of the top performing stock newsletters whose subscriptions fees are under $500. The main metric to look for is "Excess Return" which is their return above that of the S&P500. So, based on last 3 years ending June 29, 2025:

Rank	Stock Newsletter	Stock Picks	Average Return	Excess Return	Percent Profitable	Max % Return
1.	Alpha Picks	76	63%	40%	73%	969%
	Summary: 2 picks/month based on Seeking Alpha's Quant Rating; Retail Price is $499/yr. See details in our Alpha Picks Review.			July, 2025 Promotion: Save $50
2.	Moby.co	308	43.3%	12.3%	74%	1764%
	Summary: 60-150 stock picks per year, segmented by industry; Retail Price is $199/yr. Read our Moby Review.			July, 2025 Promotion:Next pick free!
3.	Stock Advisor	72	41.2%	6.9%	78%	258%
	Summary: 2 picks/month and 2 Best Buy Stocks lists focusing on high growth potential stocks over 5 years; Retail Price is $199/yr. Read our Motley Fool Review.			July, 2025 Promotion: Get $100 Off
4.	Value Investor	39	17.5%	6.1%	38%	410%
	Summary: 10-25 stock picks per year based on Zacks' Quant Rating; Retail Price is $495/yr. Read our Zacks Review.			July, 2025 PROMOTION:$1, then $495/yr
5.	Rule Breakers	66	40.0%	4.7%	61%	311%
	Summary: 2 picks/month focusing on disruptive technology and business models; Lifetime average return of 355% vs S&P500's 149% since 2005; Now part of Motley Fool Epic. Read our Motley Fool Epic Review.			Current Promotion: Save $200
6.	TipRanks SmartInvestor	121	10.6%	3.7%	55%	340%
	Summary: About 1 pick/week focusing on short term trades; Lifetime average return of 355% vs S&P500's 149% since 2015. Retail Price is $379/yr. Read our TipRanks Review.			Current Promotion: Save $180
7.	Action Alerts Plus	394	20.0%	3.4%	57%	220%
	Summary: 100-150 trades per year, lots of buying and selling and short term trades. Read our Jim Cramer Review.			Current Promotion: None
8.	Stock Advisor Canada	36	32.3%	0.5%	69%	378%
	Summary: 1 pick/month from the Toronto stock exchange; Retail Price is CD$199/yr. Read our Motley Fool Canada Stock Advisor Review.			July, 2025 Promotion: Save $100
Top Ranking Stock Newsletters based on their last 3 years of stock picks' performance through May 31, 2025 as compared to S&P500. S&P500's return is based on average return of S&P500 from date each stock pick is released. NOTE: To get these results you must buy equal dollar amounts of each pick on the date the stock pick is released. Investor Business Daily Top 50 based on performance of FFTY ETF.