1. While a fund's "current" rating may have taken into account the kind of risks the scheme has already taken, but it is not privy to the "future" portfolio mix of the fund manager.
2. Hence a fund rating cannot give an opinion about the risks that could arise in future, and should therefore be used only as the starting point for researching more about the fund, without making it as the only benchmark to accept or reject a fund.
3. At the end of the day, a fund rating is a relative tool showing market navigation of a fund among its peers.
4. Please also 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, and
c) A fund can turn mediocre, with no performance guarantee, being market-related in nature.
5. Having said that, if a fund's rating has been revised downwards continuously over all the quarters of a year, when compared to its peer schemes, it may be a good time for reviewing and weeding it out (no point in re-balancing them like stock averaging) for a better fund from its peers, keeping in mind your overall asset allocation and risk profile.
2. Hence a fund rating cannot give an opinion about the risks that could arise in future, and should therefore be used only as the starting point for researching more about the fund, without making it as the only benchmark to accept or reject a fund.
3. At the end of the day, a fund rating is a relative tool showing market navigation of a fund among its peers.
4. Please also 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, and
c) A fund can turn mediocre, with no performance guarantee, being market-related in nature.
5. Having said that, if a fund's rating has been revised downwards continuously over all the quarters of a year, when compared to its peer schemes, it may be a good time for reviewing and weeding it out (no point in re-balancing them like stock averaging) for a better fund from its peers, keeping in mind your overall asset allocation and risk profile.