What are the differences between a four-star-rated fund and a five-star-rated fund? Are these differences huge?
- Pulkit
No, not very much. However, it is important to understand that our rating is a relative rating. There can be a good fund but if 10 per cent of that category is filled with marginally superior performing funds based on a risk-adjusted scale, then they will be five-star funds, while the next one will actually become a four-star fund. The difference thus may not be very significant.
Generally speaking, I would say that I never worry when a fund slips from a five-star to a four-star rating. Also, I would like to add that a fund should never be chosen entirely based on its rating.
This article was originally published on July 30, 2019.
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