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Finance Dictionary and Glossary of Investment Terms
Morningstar 3-, 5-, and 10-Year Rating
Definition 1.
A rating that takes account of both a mutual fund''s performance and risk. To determine a fund''s star rating for a given period (three, five, or 10 years), the fund''s Morningstar Risk score is subtracted from its Morningstar Return score. If the fund scores in the top 10% of its broad investment category (equity, hybrid, taxable bond or municipal bond), it receives 5 stars (highest); if it scores in the next 22.5%, it receives 4 stars (above average); if it scores in the middle 35%, it receives 3 stars (neutral or average); if it scores in the next 22.5% it receives 2 stars (below average); and if it scores in the bottom 10%, it receives 1 star (lowest). Star ratings are recalculated monthly.
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