Monday, June 13, 2011

Morningstar to Introduce New Forward Looking Ratings

Morningstar to Introduce New Forward Looking Ratings

I have never been a big fan of the star rating system as on one hand they tell you past performance doesn't predict future results and then on the other hand they ask you to pick funds based on a rating that only takes past performance into account. On the surface a forward looking ranking sounds like a great idea, but like many things in finance it won't work. Stock analysts have shown over and over that you just can't predict how a stock will do, fund analysts will have the same problem. It is better than nothing but far from perfect.

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