How to Rate a Mutual Fund: Personalizing the Star System
by John Markese
Toss the stars, chuck the checkmarks, cast aside the letter grades, and ignore any other mutual fund ratings that come down to an all-in-one rank.
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For one, you can’t really understand a fund, your investment, by staring at a checkmark or by gazing at the stars.
Another reason to jettison rating symbols is that they are all based on weighting systems that are unlikely to reflect your specific financial/investment profile: factors that are personal and unique, such as risk tolerance, investment horizon, financial goals, and tax situation.
Finally, the monolithic ranking icons may be overly seductive as investors embrace them as crystal balls when they are really more akin to rearview mirrors.
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