What Mutual Fund Ratings Are And Who Gives Them These Ratings
The good news is that almost everyone knows what a mutual fund is, though unfortunately, not quite as many may not know what mutual fund ratings are. It is a good idea to learn about this side of mutual funds if you want to know more about how the mutual funds you have invested in are performing and will be performing in the future. Thus, mutual fund ratings refer to a scale expressed in numerical numbers that determines how mutual funds are performing. Mutual funds with the best performance levels will have top mutual fund ratings.
Can't Predict Future Growth
That is not to say that mutual fund ratings will help a person learn how the mutual fund is going to grow and neither is it an indication of expected performance of the fund though it is closely related to both these factors. You can judge how a mutual fund is going to perform if you look to its past performance both in terms of its own performance as well as in relation to other mutual funds.
It should be easy to perceive that two identical types of mutual funds that share a style as well as mutual fund ratings will generally behave along similar lines. They will also be found investing in similar type of assets as well as perform on an almost identical level. Thus, what one mutual fund does is generally mimicked by a similarly rated mutual fund and this means that even when one is losing money, the other will also do the same.
Mutual funds are of different sizes and styles and they include large caps, mid-caps as well as small caps and there are also real estate funds and even emerging market funds. The main point that one needs to learn about various mutual funds is that those funds that enjoy higher mutual fund ratings will generally perform much like other highly rated mutual funds.
Morningstar
There are also a few companies that make it their business of assessing mutual funds and these companies then provide mutual fund ratings according to certain criteria which may include past performance of the mutual funds, though this is a less than proven method of evaluating a mutual fund's future performance.
Morningstar is a good example, since it is the most popular company providing mutual fund ratings and it is in fact the most popular company. Morningstar gives mutual funds different star ratings that begin with a one star or poorest performer and which goes up to five stars or best performers.
Remember, however that Morningstar provides its ratings based on a mutual fund's past performance and thus its ratings may not always prove to be infallible with regard to how such mutual funds will behave in the future.
