Morningstar Shakes Up Its Mutual Fund Ratings System

The czar of star ratings unveils a new system that it hopes will better identify future winners.

Anyone who has ever contemplated buying a mutual fund has almost certainly seen Morningstar's star ratings. But now the Chicago research firm has launched what it calls analyst ratings to address the most common criticism of the star ratings -- that they look backward rather than forward. "Our star ratings look at past performance and that's important, but it's not always the best predictor," says Karen Dolan, Morningstar's director of fund analysis. "Our analyst ratings allow us to view performance in a broader context."

The new ratings, which will designate recommended funds with gold, silver or bronze awards, don't replace the 28-year-old star ratings; they're designed to coexist side-by-side. Funds that don't look like future standouts will get "neutral" or "negative" ratings, reflecting analysts' views that those funds will prove to be either nothing special or poor performers.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription

Why am I seeing this? Find out more here

Kathy Kristof
Contributing Editor, Kiplinger's Personal Finance
Kristof, editor of, is an award-winning financial journalist, who writes regularly for Kiplinger's Personal Finance and CBS MoneyWatch. She's the author of Investing 101, Taming the Tuition Tiger and Kathy Kristof's Complete Book of Dollars and Sense. But perhaps her biggest claim to fame is that she was once a Jeopardy question: Kathy Kristof replaced what famous personal finance columnist, who died in 1991? Answer: Sylvia Porter.