Investors Caught With Stars In Their Eyes

June 2, 2010  |  

(Wall Street Journal) — Tim Courtney decided he had had enough. In meeting after meeting this year, he and his colleagues at Burns Advisory Group had recommended mutual funds to prospective clients, only to be hit with the same response almost every time: Why are you telling me to invest in a three-star-rated fund? That sums up the way many investors allocate money to funds: Look at products that have four-star or five-star ratings from investment researcher Morningstar, take that as a seal of quality, and hope for the best. Such decisions are perhaps more common in volatile markets, when investors view top-ranked funds as somehow better equipped to handle adversity.

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