The Morningstar Mirage
Investors everywhere think a 5-star rating from Morningstar means a mutual fund will be a top performer—it doesn’t ,
has created a stir in the mutual fund business and in Morningstar itself which issued forceful rebuttals:
There’s No Morningstar Mirage - We Illuminate Investing
In addition to claim and counterclaim there have been reviews from the peanut gallery:
The upshot of all this back and forth, including the numerous studies cited in the "Who Won?" story, is that Morningstar, as expected, offers very little benefit to investors.
In my opinion, the 5-star ratings serve the interests of the fund companies that pay for them. The extensive list of categories don't really exist except to create a grouping where a fund manager can claim higher ratings.
The details of this exercise leave us with the outcome we expected: the only useful result from investment theory for individual investors is that index funds outperform. Again, our quest comes up short.
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