1. Fund ratings are typically based on past performance, judged on objective quantifiable factors, mostly on risk-adjusted basis, although they do not give any opinion about future risks.
2. Therefore, most fund ratings should be used as starting point and not the only benchmark.
3. However, if ratings have gone down continuously over all quarters of a year, as compared to their peer schemes, review to weed them out (no point in re-balancing them like stock averaging) for better funds from its peers, within your overall asset allocation and risk profile.
4. Please keep in mind that:-
a) Performance slippage of most funds is gradual.
b) Any rating system avoids radical changes by considering the long-term history of funds.
c) A fund can turn mediocre, with no performance guarantee, being market-related in nature.
d) Fund rating is a relative tool, showing market navigation of a fund to give a return higher than others in its category, even if it is negative at times.
5. After using fund ratings as a starting point, any slippage or upgrade helps to monitor the fund's performance.
2. Therefore, most fund ratings should be used as starting point and not the only benchmark.
3. However, if ratings have gone down continuously over all quarters of a year, as compared to their peer schemes, review to weed them out (no point in re-balancing them like stock averaging) for better funds from its peers, within your overall asset allocation and risk profile.
4. Please keep in mind that:-
a) Performance slippage of most funds is gradual.
b) Any rating system avoids radical changes by considering the long-term history of funds.
c) A fund can turn mediocre, with no performance guarantee, being market-related in nature.
d) Fund rating is a relative tool, showing market navigation of a fund to give a return higher than others in its category, even if it is negative at times.
5. After using fund ratings as a starting point, any slippage or upgrade helps to monitor the fund's performance.