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Funds 204: Looking at Historical Risk: Morningstar Risk

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1.
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.
2.
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.
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.
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.
5.
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.