Summary of Looking at Historical Risk: Morningstar Risk

All of the risk measurements we’ve discussed are based solely on past performance. By definition, they fail to account for any future risks a fund might harbor. For example, a fund that used to own mostly low-key large-company stocks may now be heavily invested in smaller companies, and therefore it may be taking on more risk than its historical measures show. Given this limitation, remember that statistical risk measures are a good way to begin understanding a fund’s risk, but they’re not guarantees of safety.