NEW YORK ( TheStreet ) -- Morningstar's fund ratings have long carried weight.
Investors flock to mutual funds that earn the top Morningstar grade of five stars.
But this has troubled academic researchers who argue that the star system can only provide limited guidance. The issue is that the ratings rely solely on past performance, and the past doesn't necessarily predict the future, as the boilerplate warnings note.
Morningstar has conceded the point, saying that the stars should only be used by investors as a starting point for research.Now Morningstar has introduced a new system that rewards top funds with ratings of gold, silver or bronze. Although the old star system simply indicates the funds that had the best returns in the past, the new ratings represent Morningstar's judgment about which funds will be winners in the future.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV