Are Morningstar Stars Predictive?

600px-GlobularClusterM12In a word, no. Rather than rehash the reasons in blog text, please read the embedded for all the reasons why they are not predictive and why people still seem to crave them.

For a more pragmatic approach to the markets, the videos by Sensible Investing TV on YouTube are likely a better use of your time rather than pouring over noisy statistics that overlook what you are really trying to do with your money … reach your goals and aspirations.

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4 Responses to Are Morningstar Stars Predictive?

  1. Larry Frank, Sr. March 4, 2014 at 9:32 am #

    If you click on the Topics link “Passive or Index Investing” you’ll see that is the school of thought I operate under. Here’s an article in The Economist that succinctly states why: http://www.economist.com/news/finance-and-economics/21596965-costs-actively-managed-funds-are-higher-most-investors-realise-against?mkt_tok=3RkMMJWWfF9wsRonv67AZKXonjHpfsX56%2BwuUaa0lMI%2F0ER3fOvrPUfGjI4AT8VrI%2BSLDwEYGJlv6SgFSbDGMal52bgPWBQ%3D

  2. Larry Frank, Sr. October 3, 2014 at 2:39 am #

    Morningstar’s “new” rating system also is NOT predictive (nor surprise – since nobody can predict the future)

    http://advisorinsightsblog.com/2014/10/01/can-the-new-morningstar-analyst-rating-predict-performance/

  3. Larry Frank, Sr. October 27, 2017 at 1:34 pm #

    WSJ article The Morningstar Mirage
    Investors everywhere think a 5-star rating from Morningstar means a mutual fund will be a top performer—it doesn’t

    https://www.wsj.com/articles/the-morningstar-mirage-1508946687

  4. Larry Frank, Sr. January 18, 2018 at 9:49 am #

    S&P does a Persistence test … how many funds remain in the top quartile? Few do, and none do greater than 5 years according to their findings. Thus, trading funds around based on Morningstar scores doesn’t mean much either in this regard. Plus, chasing hot funds probably means you’re getting in at the top and out at the bottom of performances.

    https://us.spindices.com/documents/spiva/persistence-scorecard-december-2017.pdf

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