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Fund Spy

Understanding the Star Rating and Fund Analyst Picks

Fund Analyst Picks pick up where stars leave off.

This column first appeared in Kiplingers.

One thing I've learned over my many years at Morningstar is that I can't write about the Morningstar Rating for funds and the Fund Analyst Picks enough. Each year in Morningstar FundInvestor I describe how the ratings and the picks performed and how best to use them. Yet the letters and e-mail messages keep coming--how do they work, what should I do with them?

I understand why all the questions. The stars and picks are complicated and important. The star ratings and picks can be a huge help in building a good portfolio of funds. But first you have to understand a little bit about how they work to make use of them.