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Morningstar Rating for Funds
Morningstar rates from one to five stars based on how well they've performed (after adjusting for risk and accounting for all sales charges) in comparison to similar funds. Within each Morningstar Category, the top 10% of funds receive five stars, the next 22.5% four stars, the middle 35% three stars, the next 22.5% two stars, and the bottom 10% receive one star. Funds are rated for up to three time periods--three-,
five-, and 10 years--and these ratings are combined to produce an overall rating. Funds with less than three years of history are not rated. Ratings are objective, based entirely on a mathematical evaluation of past performance. They're a useful tool for identifying funds worthy of further research, but shouldn't be considered or sell recommendations.

Morningstar Risk
An assessment of the variations in a fund's monthly returns in comparison to similar funds, with an emphasis on downward variation. The greater the variation, the larger the risk score. If two funds have the exact same return, the one with greater variations in its return is given the larger risk score. In each Morningstar Category, the 10% of funds with the lowest measured risk are described as Low Risk, the next 22.5% Below Average, the middle 35% Average, the next 22.5% Above Average, and the top 10% High. Morningstar Risk is measured for up to three time periods (three-, five-, and 10-years). These separate measures are then weighted and averaged to produce an overall measure for . Funds with less than three years of performance history are not rated.

Morningstar Return
Morningstar return is an assessment of the fund's excess return over a risk-free rate (the return of the 90-day Treasury bill) in comparison to similar funds, with an emphasis on downward variation. Therefore, if two funds have precisely the same return, the one with greater variations in its return is given the larger risk score. In each Morningstar Category, the top 10% of funds earn a High Morningstar Return, the next 22.5% Above Average, the middle 35% Average, the next 22.5% Below Average, and the bottom 10% Low. Morningstar Return is measured for up to three time periods (three-, five-, and 10-years). These separate measures are then weighted and averaged to produce an overall measure for the fund. Funds with less than three years of performance history are not rated.

 

 Volatility Measurements

 

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As you all can see, having a ranking of three stars or less is considered a failure if you were in grade school.  The highest ranking for a fund with 3 stars is 67.5%. The last I heard that was a (D) average and you could not stay in school with scores like that.

It is clear the only ranking that is acceptable and clear cut is five stars. If a fund has four stars in can still have a low score of 68% because the category is so broad.  I would think any thing under the 75% or C+ is just not cutting it. So I think the four star category of MorningStar can be a bit too wide open because it covers B, C, and D+  funds. 

Robert32

 Interesting, the Morning Star Rankings correspond greatly with the mutual scoring system that is used by Wall Street Insight.

Wall Street Insight is taking it a step further by offering some of aid to the funds that are having a tough time.  To my knowledge the ranking services rank the funds only. Someone needs to help the funds that are lagging.

I can only see this as a good thing, especially if the performance of the funds substantially increase as a result of the help they get in the Wall Street Insight clinic.  

The scoring system used by Wall Street Insight lines up with Morning Star in many ways. However the Wall Street Insight scoring system gives better vision because it is purely a numerical measure that needs very little interpretation, 1 is the best possible score and 99 is the worst possible score. Now that is simple to understand.  Simpler is always better.

As a financial professional that loves to swim in the land of the convoluted even this is something that bores me to tears. If 2 funds have the same performance it should be a tie, if someone is lagging they shouldn't even get stars to begin with. In the end the wallstrretinsight powered by the supravantage and any one else who wants to stand up to our fire power and succeed will be the creation of a public ratings company not the ones that belong in the pages of history but one created by us the people who should care the most with no conflicts of interest we're the ones watching them we don't need to get paid for us to rate them, if you're stinking up the place, trust me, we'll find you
If for whatever reason you we're drawn to this thread before you read the Mutual Fund Constitution be prepared, you may think we're asking alot, all we're asking is you do your jobs and if you can't have the courage to step aside or at least the common sense to seek help. we know you are all trained with different performance goals, we're telling you IT"S NOT GOOD ENOUGH ANYMORE!

vantagecta
Ryan

This now makes even more sense to me. Morningstar Ratings are directly in line with the WSI Mutual Fund Scoring system. So we all agree in which money managers need help. The big difference is we at WSI actually offer help to the sick non performing money managers. Who can argue with that?  What good does it do to say some one is in need of help by giving them a one ore two star rating and not offer some sort of assistance. 

However I am not criticizing Morningstar. They are doing a great thing with their ratings. It is a good educational tool. But at the end of the day, some one like WSI still needs to intervene in a positive way to lend a hand to the folks that are in need of help. 

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