Ratings Misconception

I’ve spoken to several people who have invested in specific mutual funds because they had a five star Morningstar rating. A perfect five star rating may sound good, but you need to understand why a fund has been given that rating. Morningstar rates funds’ performance not against the entire universe of funds, but rather they break all funds into dozens of subcategories based on their investment style. Morningstar’s categories include such esoteric subgroups as small cap emerging markets funds...