The Impact of Investment Rating

Sep 17, 2020 9:22:07 AM / by InvestorKeep



One of the big challenges of investing is the changing of investment ratings. A Five-Star rated fund can downgrade to a three or two-star fund and an investor may never know. Funds with higher historical performance receive higher ratings (more stars). Owning funds with lower ratings could mean lower returns. Morningstar gives Five-Star ratings only to funds that they determine are in the top 10% of funds in any specific category.

A recent Morningstar study found 5-Star funds outperformed their peers by an average of 1.25% per year, while 1-star funds lagged by roughly 2%. Imagine earning an additional 1.25% in on your investments every year, and compounding that increase. Over time the gains could be substantial! The Morningstar study further noted higher rated funds were about 1.5 times more likely to beat their category average than lower-rated funds (over the same period).

Higher rated funds offer better odds of greater returns. Because ratings can and do change, InvestorKeep tracks them for you (at all times) and alerts you to changes that may be costing you money.



Written by InvestorKeep

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