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8 responses to “Morningstar Star Ratings: Do They or Don’t They Predict?”

  1. Roger @ The Chicago Financial Planner

    Chris nice article. I am a big fan of Morningstar and have used their data from day 1. However I never look at the fund star rankings and have never thought of them as predictive. As I understand it, however they have a new system where they provide rankings (gold, silver, bronze, neutral, negative, etc.) that are supposed to be predictive. Again I don’t use them that way, but the ranking methodology (and the connected fund write-up) is informative in my opinion.

  2. January 31, 2013 « The Morning Pulse

    [...] Morningstar Star Ratings: Do They or Don’t They Predict? [...]

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    [...] Technical Analysis (Phil Pearlman) • Morningstar Star Ratings: Do They or Don’t They Predict? (Fiduciary News) • Ray Dalio Schools You on the Great Rotation Debate (The Reformed Broker) see also Is this a [...]

  4. Jim Watkins

    Chris – You and I have discussed this before. I hope that I am not the adviser who got you in hot water with Morningstar. Morningstar is a tremendous resource. However, studies have consistently shown the lack of persistence in their star ratings. No indictment of Morningstar, as everyone knows that past performance does not guarantee future results. I gave you the reference to one of their earlier “no predictive power” quotes. Use Morningstar’ s data for analysis purposes, but do not rely on star rating.

  5. Dan Solin: Picking Mutual Funds: What Works and What Doesn’t | Business news

    […] There has long been a spirited debate over whether Morningstar’s “star” ratings are predictive of future results. The pros and cons are nicely summarized in this article. […]

  6. Cheryl Gajowski

    FWIT, I tracked down this article from Huffington – in an effort to see what the evidence is — it’s not much. Or if it is significant, it is not very well reported. Until time travel is available we must use past performance as the only thing knowable. The qualities of being predictive and guaranteed are obviously different, and the question is always about probabilities: which outcomes are more likely with particular variables over a given time period. Or is it all a crapshoot? . The question is: does the star rating – does the research it is based on – provide bases for comparison and choice? Or should we all be in index funds as there is never any added value to anything that adds costs? As a poor benighted individual investor, I think it does. And For some reason all the people who argue that it doesn’t still use it as a measure.

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