Morningstar

4. Do you think Morning thaumaturge ratings have an impact on what investors do? Do you think they should have?

(1)
We think the answer is YES. Indeed, yet as the three criticism mentioned in the case, there argon evaluation weakness in Morningstar ratings, especially the rating is all relied on the past performance. And the rating also ignored round crucial factors that would influence investors payoff. For example, A fund with at least(prenominal) three years of performance history could be awarded a very high star rating, simply because its stock-picking has been lucky. However, such a highly rated fund may also have high fees, front- and back-end loads, 12b-1 fees, high turnover, and hidden costs that are more in all probability to undermine its coming(prenominal) performance. But there are keep mum many investors influenced by the rating system in the investiture decision. There are two reasons for this:

Most individual investors feignt understand the evaluation method and other potency problems with the star ratings. Many investors appear simply to be fascinated by the stars, and they just follow them without further considerations. Therefore, many investors prostitute Morningstar Fund ratings as a tool to signal future counterpunchs.





Different investors have different views about which screening prosody an investor should use to reduce the number of mutual funds grim to a more manageable set for evaluation in detail. Even the criticism about the rating, it offered value to investors for reference. For example, an evaluation system, which takes in to account the future perspective, cant promise the return and its forecast precision, just like the analyst report. Hence, there are still some investors see Morningstar ratings as one of the resourcefulness to find winning mutual funds

(2)
Based on the case, we discover that Morningstar ratings are indicators of past performance, and should not be used to predict future performance. The most prudent way for investors to use the star rating for funds is...If you want to get a amply essay, order it on our website: Ordercustompaper.com



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