Morningstar Ratings

[justme]

On the fact sheet for the funds my 401k offers it gives a Morningstar Rating. From the little I know they seem to be a big fish in rating funds, but I'm wondering how much stock I should put into the number of stars a fund gets. Whether I should stick with the 4 and 5 stars and ignore the rest.

What say you?

TIA

[Sum Dum Gai]

I used to have a lot more faith in the rating agencies before they all rated bad mortgage derivatives triple A.

As far as I know Morningstar is still pretty highly respected when it comes to rating mutual funds though, so sticking with their 4 and 5 star rated funds is pretty unlikely to be a bad decision.

[clarkrl2]

I like to look at the morningstar rating. I also like to look at the fund manager tenure and how the manager has performed relative to the benchmark.

[safeharbor37]

Past Performance Does Not Guarantee Future Results
[Morningstar ratings are based entirely on past performance]
www.cbsnews.com/8301-505123_162-37640429/whats-right-and-whats-wrong-with-morningstar-fund-ratings/

Perhaps the best use of the Morningstar rating system is not as a way of finding which funds to invest in, but as a way to identify which funds to avoid altogether. Fund performance tends to revert toward the mean over the long-term -- today's winners become tomorrow's losers, and vice versa. But some funds are simply so lousy that they have essentially no hope of ever providing decent returns. These funds, obviously, are largely relegated to one- and two-star ratings.