Morningstar analyst David Kathman says investors shouldn't buy a fund based solely on its stewardship grade. But he notes that funds with top grades have generally done better than lower-ranked competitors. "In the last several years, funds that invest for the long-term have outperformed funds with short-term focuses," he says.

Some of the Morningstar criteria are subjective, and many investors may disagree with the scores. But the general approach is sound. Before buying any funds, investors should consider the Morningstar criteria. The goal should be to find fund managers who can be viewed as trusted business partners.

Of the half dozen criteria considered by Morningstar, the most important may be for fees. Morningstar gives top grades to funds with expense ratios that fall in the cheapest 20% of their categories. Funds in the most expensive 40% get failing marks.

The emphasis on fees is warranted. In order to be good fiduciaries, fund boards should insist on low fees. Because expense ratios are subtracted from returns, funds with low fees have a big advantage over competitors. Funds that gouge investors may trail the pack.

Funds are also graded based on manager incentives. The Morningstar system prefers portfolio managers who have at least $1 million or one-third of their liquid assets invested in their own funds. Managers who have a stake in their funds will pay close attention to the welfare of shareholders, the thinking goes. To find data on the investments of portfolio managers, check statements of additional information, which are available on many fund Web sites.

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