Don’t Choose Mutual Funds Based Just On Ratings

Queries Many mutual funds (MFs) are not rated. Should ratings be made compulsory for all mutual funds above a certain fund size? How do ratings help choose a fund? Ratings should not be taken as a factor to identify investment opportunity in any mutual fund scheme. There are various independent rating agencies, such as Value Research, Morningstar, and Crisil, which provide ratings for various category of funds based on quantitative and qualitative factors, such as performance, portfolio quality and fund manager track record. For instance, within performance, the ratings agencies may look at consistency of performance in near-term and long-term, or even risk-adjusted performance. While ratings can be good to get a broader understanding, one should consult a financial advisor to get a detailed analysis, including more subjective and qualitative factors. My wife (51) and I (53) invested in...