Your fund's star rating has dropped. Now what?

Who likes to watch a movie if it's rated 5-on-10 on IMDb? We don't blame you if you, similarly, ignore mutual funds that are rated poorly by Value Research. (Hmm, you can say that Value Research ratings for mutual funds is what IMDb is for movies. #HumbleBrag.) It's even worse when the rating of the mutual fund you invest in has declined. You feel you picked a loser. You lose faith, your day gets ruined, and, hey, who can blame you? But does that mean you should chuck the so-to-speak underperformer and look for greener pastures? Before we answer that question, let's explain how we rate mutual funds and the reasons it takes its twists and turns. The star system If you check our website - or even go on popular fintechs like Groww and ETMoney, among others - you'll observe that each mutual fund is rated out of five stars. We provide that rating. These funds are assigned stars by comparing risk-adjusted performance against their direct peers. For example, a 'direct' small-cap fund's r

This article was originally published on October 13, 2023.