The following story made me chuckle because the answer surprised me and may surprise you as well.
MarketWatch had an interview with Morningstar mutual fund analyst Marta Norton. The point of the interview was Marta’s contention that funds should earn their place in your portfolio by “meeting future expectations” rather than past performance. As an example, she mentioned CVGRX and CAAPX.
Hmm. How do you do that?
Being a numbers person, I first compared the 2 funds against each other over 2 years, 5 years and 10 years. The 2 year comparison is shown below:
To prove her point, however, Marta put a hold rating on CVGRX suggesting that recent performance and asset growth could hinder future returns. At the same time, she put a Buy on CAAPX.
This is confusing. Morningstar has always promoted their star rankings as the ultimate in comparing funds before you buy. Has that now changed? Are they weighing other factors?