Star Rating — Mutual Fund Term Explained

A 1-5 star ranking of mutual funds by rating agencies based on risk-adjusted past performance. Ratings change frequently — do not invest solely on current star ratings.

Star ratings (1-5 stars) by CRISIL, Value Research or Morningstar rank funds within their category on risk-adjusted past performance. 5-star = top quartile; 1-star = bottom quartile.

Important caveat: star ratings are backward-looking and frequently change. A 5-star fund today may be 3-star in two years.

Related terms

• Trailing Returns — Point-to-point returns calculated from today backwards. The most common return metric but sensitive to start/end dates.
• Rolling Returns — Returns calculated over all possible periods of a given length. Shows consistency of performance rather than cherry-picked point-to-point returns.
• Sharpe Ratio — Return per unit of total risk taken. Higher is better. Shows how much excess return you earn for each unit of volatility.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.