Star Fund Review
Morningstar Mutual Fund Guide
Kaustubh belapurkar
Picking the right Mutual Funds
Morningstar Analyst Ratings help identify those funds which have the ability to outperform their benchmark and / or peer group
Investors today are faced with a plethora of options when it comes to investing in Mutual Funds . Picking funds is often a hard task as there is a sea of information available to investors and the sheer number of funds to pick from can make the task seem daunting . Many investors tend to rely purely on historical shortterm performance to make investment decisions , which to our mind can be misleading . For starters , historical performance may or may not be repeatable in the future . Secondly , it is important to ascertain the attribution of the performance — is it due to the fund being invested in specific segments of the market that have done really well ? Or is the performance more broad-based across stocks and sectors ? The latter would suggest a more repeatable performance going forward .
Founded in 1984 in the United States , Morningstar is an independent investment research firm with operations in 27 countries . Our mission is to create great products that help investors reach their financial goals . We are fiercely independent in our research and put investors at the center of everything . Morningstar has been in India since 2008 and produces two ratings on funds – Morningstar Ratings ( Star Ratings ), which are quantitative ratings based on historical performance and Morningstar Analyst Ratings , which are a qualitative forward-looking assessment of the fund manager and the strategy .
The Morningstar Ratings are based on the historical risk adjusted returns of fund versus their peer group .
Don ’ t pick funds purely looking at past performance , which to our mind can be misleading
These ratings capture the risk adjusted returns of the fund over longer time horizons and as well use proprietary metrics to penalise funds with large downsides . Star Ratings are based on a 5 point scale from 1-star to 5-star , with 5-star being the best . We believe these are a good starting point for investors to shortlist more consistent funds basis their historical performance .
While Star Ratings are a good starting point , the Morningstar Analyst Ratings help identify those funds which , we believe , have the ability to outperform their benchmark and / or peer group , within the context of the level of risk taken , over the longer term . Analyst Ratings use a globally consistent five pillar process to assess funds on “ People ”, “ Process ”, “ Parent ”, “ Performance ” and “ Price ”. Analysts carry out extensive research followed by fund manager interviews to assess funds on these criteria . The first three pillars ( People , Process , and Parent ) form the core of our assessment and believe these eventually translate into long term consistent performance going forward . Funds are rated again on a five point scale – Gold , Silver , Bronze , Neutral , and Negative .
These fund reviews are intended to help new investors looking to invest into mutual funds as well as help existing investors take a decision whether to stay invested in a particular fund .
We are glad to be associated with Outlook Money to bring our best investment ideas across to investors to help them make the right investment decisions . Happy investing !
The author is Director Fund Research Morningstar Investment Advisor India
Disclaimer @ 2017 . All rights reserved . The Morningstar name and logo are registered marks of Morningstar , Inc . This Report is issued by Morningstar Investment Adviser India Private Limited (“ Morningstar ”), which is registered with SEBI ( Registration number INA000001357 ) and provides investment advice and research . Please visit http :// www . outlookindia . com / outlookmoney / invest / picking-the-right-mutual-funds-2542 and read important statutory disclosures , as mandated by SEBI , regarding the information , data , analyses and opinions given in this report .
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Outlook Money December 2017 www . outlookmoney . com