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Funds 206: Gauging Risk and Return Together: The Morningstar Rating

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1.
The Morningstar Medalist Rating picks up where commonly used measures of the past leave off.
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True. It is a forward-looking, qualitative rating assigned by Morningstar's 100+ fund analysts. It takes into account many factors that the purely quantitative Morningstar Rating for funds cannot.
2.
Morningstar will only rate a fund if _______.
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It has at least three years of performance history. Morningstar rates all funds for up to three periods--the trailing three, five, and 10 years.
3.
Which fund probably earns a five-star rating?
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A fund with extraordinary returns and low risk. Very low returning funds are unlikely to earn high ratings, as are modest-risk, modest-return funds.
4.
The Morningstar Medalist Rating is meant to identify funds that _______.
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Morningstar analysts believe have the ability to outperform their peer group and/or relevant benchmark on a risk-adjusted basis over the long term. The Medalist Rating is assigned by Morningstar's manager research analyst covering the fund.
5.
Which statement is false?
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The Morningstar Medalist Rating measures a fund's risk-adjusted performance against funds in the same category. It's the Morningstar Rating (star rating) -- not the Morningstar Medalist Rating -- that measures a fund's historical risk-adjusted performance and is a backwards-looking rating. The Morningstar Medalist Rating is a forward-looking measure and is assigned by the Morningstar manager research analyst covering that particular fund.