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Investors Used These Quality Funds Well

We look at how investor return exceeds total return for these highly rated funds, in part three of our series examining these two metrics.

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For the past two weeks Five-Star Investor has looked at funds Morningstar's analysts like but which investors have used poorly. We turned the spotlight on funds in which investor return--that is, the real-world experience of average investors in the fund--badly trailed that of the fund itself during the past decade.

Why don't investor returns match those of the funds they own? One of the main culprits is performance-chasing--investors pouring assets into funds with strong recent returns only to find that the funds cannot repeat those performances. This could be because a fund's larger asset base becomes a burden--especially in the small-cap arena--or it could simply be because a fund manager's hot streak begins to cool. Another common theme is investors fleeing funds after steep drops and thereby missing out when funds rebounded.

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Adam Zoll does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.