By
eHow Personal Finance Editor
Difficulty: Moderately Challenging
Things You’ll Need:
- Computer with Internet access
- Stock or fund names
- Morningstar ratings
Read a Morningstar Rating for Funds
Step1
Locate the Morningstar rating for your fund. If you're having trouble finding it, the best place to look is on the Morningstar Web site (see Resources below).
Step2
Learn how Morningstar ratings are reported. Funds are rated on a scale of 1 to 5 and are based on the fund's performance in relation to similar funds. To get the final data point, Morningstar adjusts for risks and sales charges.
Step3
Determine whether your fund has multiple ratings. It is not uncommon for funds to have ratings for up to 3 time periods (3, 5, and 10 years), which are then combined to produce an overall rating.
Read a Morningstar Rating for Stocks
Step1
Search the Morningstar Web site for the stock. If you already know the stock's ticker number, you can enter it in the search box. Alternatively, you can also search for a stock by company name.
Step2
Find and examine the rating for your stock, which is based on a combination of the stock's current market value and what Morningstar feels is a fair market value. Ratings for stocks are adjusted for risk.
Step3
Compare the Morningstar ratings for several stocks to determine which would best fit your investment needs and goals.
Step4
Consider the level of risk you're willing to take with your investments. Stocks with 5-star ratings are expected to offer investors a better return than stocks with 1-star ratings.