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Funds 204: Looking at Historical Risk: Morningstar Risk

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1.
Morningstar Risk is based on the idea that investors are more concerned about _______.
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The chance of losing money. Morningstar Risk is based on the idea that investors are more concerned about a probable loss than an unexpectedly high gain.
2.
Morningstar's bear-market rankings show you know how a fund performed during all time periods.
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True. The bear-market rankings show you know how a fund performed only during certain time periods.
3.
Morningstar Risk measures how volatile funds are _______.
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Relative to others in its category. Morningstar compares the risk of each fund with other funds in the same Morningstar category.
4.
What's the best way to use bear-market rankings?
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To find funds that tend to do relatively well when the market falls. If you seek funds that offer a narrow range of returns, examine standard deviation. If you want funds that rarely underperform, look for low Morningstar Risk scores.
5.
If you want to compare how volatile a bond fund and a stock fund are, use _______.
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Standard deviation. Both Morningstar measures treat U.S. equity funds and bond funds separately, so you can't use them to compare a stock fund with a bond fund. Standard deviation is an absolute figure, so you can use it to compare the two funds.