The Morningstar Rating for Funds, often referred to as the Star Rating, measures a fund’s past performance compared to similar funds on a risk-adjusted basis.
What is the Morningstar Rating™ for Funds?
A fund that consistently outperforms its peers receives five stars while one that consistently underperforms receives one star. In addition, a more volatile fund receives a lower rating than a steadier fund that achieved the same returns.
The Morningstar Rating for Funds shouldn’t be the sole factor in choosing a fund, but it helps investors get started. A fund must have at least three years of performance to have a Star Rating.