There are many fund rating agencies in the market, such as Morningstar, Haitong and Galaxy. And these rating agencies actually have similar standards for fund rating. Let's take Morningstar as an example to understand the fund rating. After all, I am more familiar with Morningstar personally.
Let's look at the rating logic of funds.
First of all, rating agencies will classify all funds according to standards. For example, Morningstar does not classify domestic open-end funds (Morningstar does not classify domestic closed-end funds). According to the different types of assets, * * * can be divided into seven categories: stock funds, active allocation funds, conservative allocation funds, ordinary bond funds, short-term debt-based funds, money market funds and principal guaranteed fund. In these classifications, equity funds account for ≥70% of the net asset value, and bond funds account for ≥70% of the net asset value. The assets between them belong to multi-level allocation, conservative allocation and other allocation funds.
Then, considering the performance and risks of funds, all funds are ranked. Performance and risk are almost a pair of synchronous indicators, but everyone wants to choose low-risk and high-yield funds, so what is considered here is the risk-adjusted performance. This kind of risk adjustment has a complex algorithm. In this respect, I am not an absolute professional, and I can only choose to believe in my major.
Next, sort similar funds according to their performance and income. The former 10% is five stars, 10%-32.5% is four stars, 32.5%-67.5% is three stars, 67.5%-90% is two stars, and the last 10% is one star. Funds established less than one year do not participate in the rating.
It can also be known that the rating of the fund is not an absolute standard. It is possible that the performance of the two funds is similar, but because of the limited number of places, there is a difference of one star.
Fund rating can give you a general judgment on the fund, but it is definitely not the only criterion for your judgment.
There are three-year ratings and five-year ratings in the rating standards, and some excellent new funds naturally miss the rating list. If you only rely on ratings, you may miss many good new funds.
Rating depends on historical performance. If a fund has just changed its fund manager, then those bright achievements belong to the predecessor, which has little to do with the current fund manager and has little reference value.
Fund rating is based on historical performance, with the purpose of simplifying the process of investors' fund selection, and then making further screening on this basis. A highly rated fund does not mean that it will continue to achieve excellent performance in the future.