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Mutual Fund Investment Ratings |
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| Rating |
Definition |
| A |
Excellent. The mutual fund has an excellent track record for maximizing performance while minimizing risk, thus delivering the best possible combination of total return on investment and reduced volatility. It has made the most of the recent economic environment to maximize risk-adjusted returns compared to other mutual funds. While past performance is just an indication -- not a guarantee -- we believe this fund is among the most likely to deliver superior performance relative to risk in the future as well. |
| B |
Good. The mutual fund has a good track record for balancing performance with risk. Compared to other mutual funds, it has achieved above-average returns given the level of risk in its underlying investments. While the risk-adjusted performance of any mutual fund is subject to change, we believe that this fund has proven to be a good investment in the recent past. |
| C |
Fair. In the trade-off between performance and risk, the mutual fund has a track record which is about average. It is neither significantly better nor significantly worse than most other mutual funds. With some funds in this category, the total return may be better than average, but this can be misleading since the higher return was achieved with higher than average risk. With other funds, the risk may be lower than average, but the returns are also lower. In short, based on recent history, there is no particular advantage to investing in this fund. |
| D |
Weak. The mutual fund has underperformed the universe of other funds given the level of risk in its underlying investments, resulting in a weak risk-adjusted performance. Thus, its investment strategy and/or management has not been attuned to capitalize on the recent economic environment. While the risk-adjusted performance of any mutual fund is subject to change, we believe that this fund has proven to be a bad investment over the recent past. |
| E |
Very Weak. The mutual fund has significantly underperformed most other funds given the level of risk in its underlying investments, resulting in a very weak risk-adjusted performance. Thus, its investment strategy and/or management has done just the opposite of what was needed to maximize returns in the recent economic environment. While the risk-adjusted performance of any mutual fund is subject to change, we believe this fund has proven to be a very bad investment in the recent past. |
| + |
The plus sign is an indication that the fund is in the top third of its letter grade. |
| – |
The minus sign is an indication that the fund is in the bottom third of its letter grade. |
| U |
Unrated. The mutual fund
is unrated because it is too new to make a reliable
assessment of its risk-adjusted performance.
Typically, a fund must be established for at least
three years before it is eligible to receive a
TheStreet.com
Investment Rating. |
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The TheStreet.com Investment Ratings represent a completely independent, unbiased opinion of a mutual fund's historical risk-adjusted performance. Each fund's rating is based on two primary components: (1), its Performance Rating and (2), its Risk Rating.
A fund's Performance Rating is based on its total return to shareholders over the last trailing three years, including share price appreciation and distributions to shareholders. This total return figure is stated net of the expenses and fees charged by the fund, and we also make additional adjustments for any front-end or deferred sales loads.
This adjusted return is then weighted to give more recent performance a slightly greater emphasis. Thus, two mutual funds may have provided identical returns to their shareholders over the last three years, but the one with the better performance in the last 12 months will receive a slightly higher performance rating.
The Risk Rating is based on the level of volatility in the fund's monthly returns, also over the last trailing three years. We use a statistical measure -- standard deviation from the mean -- as our barometer of volatility. Funds with more volatility relative to other mutual funds are considered riskier, and thus receive a lower risk rating. By contrast, funds with a very stable returns are considered less risky and receive a higher risk rating.
Rarely will you ever find a mutual fund that has both a very high Performance Rating plus, at the same time, a very high Risk Rating. Therefore, the funds that receive the highest overall
TheStreet.com Investment Ratings are those that combine the ideal combination of both primary components. There is always a tradeoff between risk and reward. That is why we suggest you assess your own personal risk tolerance using our Investor Profile Quiz as a part of your decision-making process.
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