May 2009
17
There are over 15,000 mutual funds (MF). No wonder most potential investors are confused. But, can you trust mutual fund ratings that are published? Not really. It's always best to do your own research and make your final decision based on what you are looking for in an investment, not what some unknown entity has to say about it. Let the ratings be a guide if you like, but you will be the one that takes a beating financially if it's a wrong choice, not the MF ratings company.
One of the biggest problems with mutual fund ratings is that during a long-term bull market, investors and those who rate funds can easily become complacent. During volatile market times, mutual funds managers are susceptible to any temptation to try to increase performance or protect against downside risk; both factors can lead to rogue trading, or even fraud.
Also, due to the lengthy process of becoming a highly-rated fund, up-and-coming funds may not be recognized in time to make a substantial investment in their early period.
http://biz.yahoo.com/investopedia/090422/4776.html?.v=1&.pf=retirement
