Five Star Mutual Funds

Five star mutual funds should be the "cream of the mutual fund crop" right? Well, you're right if you you look at these mutual funds with a short investment horizon.

Made famous by their market moving mutual fund rating system, Morningstar went public in a spectacular fashion, on May 2nd, with a deal worth more than $695 million.

Have you ever invested in a mutual fund based on their one to five star mutual fund rating system? If you have already, or are considering investing in a mutual fund with a high "star" rating, then you need to read every word on this page.

Five Star Mutual Funds: Falling Stars

Mutual fund research, specifically mutual fund research of funds that received the premier rating of five stars were studied to see just how well they fared. Matthew Morey, a finance professor at Pace University, took a hard look at the diversified mutual funds three years before and after they received their five star mutual fund rating.

What he found is shocking!

When looking at these five star mutual funds, and adjusting for risk, Matthew found that this collective group of premier funds outperformed the S&P 500 index fund average by 0.36% a month for the three years prior to receiving the five star award...which is pretty darn good!

What happens afterward is less impressive. A month after receiving the award, they lagged the S&P 500 index fund average by 0.41%...not so good.

Typical Mutual Fund Fall Off

Mutual fund investors have a tendency to chase performance results and the five star mutual funds attract this investment money in droves. Unfortunately, this added investment capital comes with an added burden as the mutual fund is now challenged to invest this capital in stocks that will outperform the general market.

Since the dollar volume is large, the investments must also become proportionately larger and this has a natural tendency to lead toward larger companies. Companies that also have a tendency to reflect the performance of the overall market...or the S&P 500 index fund average.

Long Term High Performance Mutual Funds

Rather than chasing today's five star mutual funds, tomorrows top 10 mutual funds, or next week's "super mutual fund", stop and look at the one mutual fund that continuously beats 87% of its peer group funds. The mutual fund with the industries lowest costs and lowest tax burden...the plain old S&P500 Index fund.

It's not too exciting but it does keep performing year in and year out. No "star awards" for this fund but it truly is a shining star when it comes to long term performance.

And yes, I realize I'm supposed to be promoting our Investment strategy but I also realize it's not for everyone. If you're going to pass on our system, I still want your investment to be successful.

Learn More About Mutual Funds

No matter what you think you know about the stock market, mutual funds or just investing in general, you still need this book. We'll show you the real truth the rest of the industry wants you to gloss over and forget about.

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