How to Use Mutual Fund Ratings

You see them next to your mutual fund on various websites and magazines. Mutual fund ratings. Learn how to use them to determine when you should sell and when you should buy the mutual funds. Mutual fund ratings are a powerful tool in the arsenal of a successful trader.

Difficulty: Moderately Easy

Instructions

1. Find the mutual fund rating. You need to find the mutual fund ratings to use them. There are numerous websites that provide a mutual fund rating. MSN, TheStreet, BusinessWeek and Morningstar are the most popular choices.

2. Write down the mutual fund ratings from the websites. Make sure to get the mutual fund rating from many websites to form an average mutual fund rating. Most websites will give the rating on a scale of 0 to 100 or 1 star to 5 stars.

3. Compute the average mutual fund rating for your mutual funds in your portfolio. Locate any mutual fund ratings that are below 50 and focus on them.

4. Check to see if a new manager is running your mutual fund with a rating below 50. If there is a new manager running the show then it might not be time to bail on the mutual fund. Give him/her enough time to try to prove their worth. If it is a current manager, check to see if they are simply in a slump or a long downturn.

5. Never rely solely on a mutual fund rating. Mutual fund ratings are a great asset in making your decision but they should not be the only factor. Use mutual fund ratings in combination with other measurements to determine your financial moves.