Mutual Funds Ratings – What To Pay Attention To?

Mutual Funds Ratings

When evaluating mutual funds ratings what should you pay attention to? These ratings provide an overview of the fund for specific factors, such as quality and risk among other factors. Not all ratings are the same, and there are different types of ratings and rating companies. Morningstar is one company that rates all types of mutual funds and other types of investments, including stocks and bonds. The rating scale for Morningstar uses stars, and funds are given between 1 and 5 stars. Other companies use other rating scales that use numbers or symbols. Morningstar is the most frequently used rating system by investors but there are other rating tools that are also popular. Many investors prefer Morningstar because of the snapshot of the fund that is provided, but the 5 star rating system is not always accurate according to some investors.

When you are examining mutual funds ratings the first thing you should pay attention to is the category of the fund. Possible categories include large, medium, and small, growth, value, and blend, utilities, technology, and many others. The fund category will detail the sectors that the fund invests in. Large cap mutual funds mainly have large cap stocks and bonds in the fund portfolio, while technology funds hold investments that are mainly in the technology field. The year to date return is another important aspect with any fund. This element shows the return that the fund has yielded so far for the current year.

The expense ratio is another important consideration with mutual funds ratings. The expense ratio shows the expenses that investors are charged, and these can include management fees and other expenses that are a result of operating the fund. The expense ratio shows the fund expenses as a percentage, and this amount can vary from very small to very large. Whether you choose small cap mutual funds, energy funds, or other fund types it is important to keep your investment costs as low as possible. The higher your costs are the lower you investment gains will be. The total assets of the fund are also usually provided in the ratings, and Morningstar provides the amount of assets owned by the fund in the millions of dollars.

One thing to watch for with mutual funds ratings is a load fee. Load fees are simply commissions paid to the broker or fund manager to help you choose the right investments, and no load funds usually have lower fund expenses. If you are capable of making fund choices without any professional assistance than a load fee is simply an additional charge that cuts into your returns. All fund ratings also provide the specific rating according to the scale used, such as a number of stars or a specific number on a numerical scale. Some mid cap mutual funds will rate high and others will rate low, and this is true of all fund types. Only careful research and fund comparisons can help you find the right investments. Fund ratings are only one of the many tools available to help you do this.