Five Stars Must Be Better Than One, Right?
Chart of the Week for July 12-July 18, 2002
Choosing a mutual fund in a difficult market environment can be a challenging task. One tool many investors rely on when selecting funds is the Morningstar Star ratings. While they show how funds have performed in the past, using them to determine which funds will perform well in the future isn’t recommended. This becomes apparent looking at large-cap growth funds in recent years. Although one would expect performance for one- and five-star funds to be different, the data show otherwise. Looking at both one- and five-star funds (based on the beginning of the year) performance is virtually identical in 2001. And, that pattern seems to be holding so far in 2002, with one-star funds at the beginning of the year only slightly trailing five-star funds. The bottom line: past performance is no guarantee of future returns.
This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.
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The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Services, LLC by calling 800-669-7400 or by writing to 777 North Capitol Street, NE, Washington, DC 20002-4240. Para asistencia en Español llame al 800-669-8216. Performance data current to the most recent quarter end is available by visiting www.icmarc.org.