Can you make a steady profit by counting the stars? The correct way to open the fund rating

Without considering the cost, it is believed that most tourists would prefer to choose a five-star hotel. The official star rating symbolizes luxury facilities, top service and security management, and seems to be the best marketing tool for the hotel. In the fund world, there are also a variety of rating systems to provide reference for investors, so do you rely on ratings to judge whether the fund is reliable?

There are many kinds of funds, coupled with the operation of different levels of fund company research teams, investors must have a higher ability to identify funds if they want to make a profit, therefore, the fund ratings and rankings issued by independent third-party fund rating agencies have become an important investment reference. There is a saying in the industry, "buy a fund and count the stars." this shows the authoritative position of fund rating in the hearts of the people.

Of course, there is no free lunch in the world where fund ratings alone can ensure profitability. Instead of passively accepting the fund rating, it is better to further understand the deep meaning of the fund star representative. Today, Niuniu will take you into the fund rating world to help establish a more comprehensive and objective understanding of the fund.

01 Fund stars and rating agencies

Fund rating refers to the collection of relevant information by fund rating agencies, through scientific qualitative and quantitative analysis, according to certain standards, to anticipate the risks that investors need to bear and the returns they can get after investing in a certain kind of fund, and rank the funds according to the expectations of returns and risks.

-Encyclopedia definition of fund rating

Simply understand, fund rating is a comprehensive analysis and comprehensive evaluation of the fund by some professional institutions to provide investors with risk tips and past performance reference. The star rating of the fund is generally divided into five levels, the highest is five and the lowest is first, and the higher the level is, the higher the agency's evaluation of the fund.

Photo source: Morningstar website

At present, the domestic fund market is active in Morningstar, Lipper, Fitch and other international professional fund rating agencies, as well as securities firms represented by Galaxy Securities and CITIC. Among them, we are most familiar with the famous Morningstar Fund rating.

Founded in 1984 and headquartered in Chicago, USA, Morningstar (Morningstar, Inc.) is currently the independent third-party investment research and fund rating authority in the global capital market, and the only listed company engaged in fund rating business in the world. The company has branches in 16 countries and regions around the world, studying and tracking more than 140000 securities. The fund star evaluation system and investment style box method pioneered by it have become the industry standard of the global fund industry. As a research institution mainly aimed at retail investors, Morningstar Fund rating has become quite popular among Chinese investors.

02 Five-star products = never turn over?

For most investment rookies, the fund star is indeed a "screening artifact", with dazzling fund instant differences. Maybe when you see here, you suddenly enlighten yourself. Don't you just pick a five-star fund and make a profit and break even? Niuniu shook his head helplessly. In the ever-changing capital world, there is no such a wonderful thing.

On the one hand, star rating is a reflection of the past performance of the fund, and it cannot predict the future, still less can it be used as a criterion for future selection.The fund has a high star rating, which represents the investment strategy of fund managers and research teams in the past three years. The number of stars alone cannot reflect the impact of this subjective factor. The future performance of the fund is not only affected by the change of fund manager, investment strategy and investment portfolio, but also controlled by the macro environment and other factors.

On the other hand, star evaluation is lagging behind.The funds that participate in the rating are generally required to be established for more than three years, and many funds with excellent performance lose their "tickets" to compete for stars. Although there is no such basis in the list of high stars, it does not mean that it has no investment value.

So, just through the fund rating to get more returns? This dangerous idea may need to be corrected.

03 The correct use of star posture

First, star comparison only applies to similar funds.In the case of Morningstar, the evaluation method will be adjusted according to different fund categories. Therefore, it is pointless to compare a five-star stock base with a Samsung debt base.

Second, being more valuable than a star is the judgment logic behind it.Since relying on stars is a very naive investment operation, what is the meaning of stars? On a star basis, we need to look for the factors behind high ratings, such as fund companies, fund managers, position allocation, risk control, etc., and then determine whether these factors will continue to contribute to future performance. In fact, stars convey more of a logic.

Third, the longer the rating time, the greater the reference significance.Generally speaking, the longer the fund is rated, the more experienced the investment team is, and the more likely it is to experience the peak and trough of the market, and the performance in the complete bull-bear cycle can more fully reflect the risk level and stability of the fund. so it's more instructive.

Fourth, measure their own ability to accept the risk, clear the expected value.High star does not mean low risk. When selecting funds, you need to have a clear understanding of your risk-return characteristics, and then select high-star funds as the alternative pool according to the rating. Then evaluate whether the returns and fluctuations of the funds in the pool are in line with your expectations.

Conclusion

In a wide variety of fund world, rating provides investors with intuitive and authoritative reference tools, and provides investors with the role of screening and narrowing the scope of selection. However, it is irrational to blindly believe in fund ratings, which are only a reflection of past performance and serve as criteria for future selection. When investing, people need to think constantly and gradually form their own investment logic and scientific investment concept.