Performance of top-rated Morningstar mutual funds

If you think future outperformance of top-rated Morningstar domestic equity funds will be 0.7% a year, as it was in the past, the after-tax return on index mutual funds will probably be higher, since the active funds trade and since some funds will lose their top rating, triggering further turnover. The 2.2% edge for top-rated foreign equity funds is larger and may justify investing in them even in a taxable account. In a tax-deferred account the case for a strategy of owning top-rated funds is stronger.
formatting link
How Our Top-Rated Funds Have Performed A portfolio approach to measuring our Morningstar Medalist performance. By Russel Kinnel | 01-27-14
"Our top-rated U.S. equity funds returned a cumulative 8.1% annualized over the trailing 10-year period ended Dec. 31, 2013, compared with a 7.4% return for the S&P 500 and 8.0% for the Wilshire 5000. From the batting-average side, we saw 68% of funds outperform their peer group and 51% hit the top quartile. For foreign equities, our top-rated funds returned an annualized 9.1% versus 6.9% for the MSCI EAFE over the past 10 years. The batting average was 79% outperforming and 58% in the top quartile. We don't have a single benchmark that's good enough for allocation funds, but we do have batting averages. Our allocation funds outperformed 92% of the time over the past 10 years, and 65% finished in the top quartile.
For bonds, we limit our total-return test to single categories because the performance varies too much to compare a broad group of funds with a single benchmark. So, for taxable bonds, we compare intermediate-bond funds to the Barclays U.S. Aggregate Bond Index. There, our top-rated funds returned 5.2% annualized versus 4.3% for the index. Our batting average is calculated across all bond-fund categories, and there we saw 85% of our taxable-bond fund Gold/Analyst Pick funds beat their peers. In addition, 78% finished in the top quartile of their group. For municipals, we compare the muni national long category against the Barclays Municipal Index.
The cumulative return for our top-rated funds matched the 4.3% of the index. On a batting-average basis, 95% beat their peers and 78% finished in the top quartile."
Reply to
Beliavsky

Site Timeline Threads

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.