Skip to Content
US Videos

3 Funds That Are Worse Than They Look

Don't let these funds' stellar recent returns obscure their underlying deficiencies.

Mentioned: , ,

Susan Dziubinski: In a video that aired a couple of weeks ago, we examined three funds that were better than they looked. All three had lousy star ratings but strong fund analyst ratings. Today, we're doing just the opposite. We're looking at three funds that aren't as good as they might first look. These funds all earn 5-star ratings but just Neutral fund analyst ratings.

Robby Greengold: Fidelity OTC is a large-cap growth fund that currently earns 5 stars. That's a reflection of excellent historical performance relative to its category. For example, the fund beat 95% of its category over the past five years. And that outperformance is mostly attributed to bold bets made at the stock level. For example, the fund held a hefty stake in Tesla from 2016 to mid-2017. That was an excellent time to be in the stock.

Susan Dziubinski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.