{"id":8328,"date":"2025-05-30T20:13:23","date_gmt":"2025-05-30T14:43:23","guid":{"rendered":"https:\/\/www.torusdigital.com\/toruscope\/?p=8328"},"modified":"2025-08-25T12:40:04","modified_gmt":"2025-08-25T07:10:04","slug":"what-is-star-rating","status":"publish","type":"post","link":"https:\/\/www.torusdigital.com\/toruscope\/mutual-funds\/what-is-star-rating\/","title":{"rendered":"How to Use Star Ratings to Choose the Right Mutual Fund?"},"content":{"rendered":"

Mutual funds come in all shapes and sizes, and for most investors, picking the right one can be confusing. This is where <\/span>star ratings<\/b> come in. But <\/span>what is star rating in mutual funds<\/b>, and should you trust it blindly? Let’s break it down simply and clearly so you can make informed investment decisions.<\/span><\/p>\n

<\/span>Understanding Star Ratings<\/span><\/span><\/h2>\n

Star ratings are a quick way to judge the past performance and risk level of mutual fund schemes. Just like a five-star hotel rating gives you an idea of quality, a fund’s star ratings act as a summary of a fund\u2019s historical track record. These ratings are not decided by fund companies themselves, but by independent agencies that use data-driven criteria.<\/span><\/p>\n

They help investors compare <\/span>mutual fund schemes at a glance and narrow down options before digging deeper. But while they seem convenient, understanding <\/span>how they are calculated<\/b> and what they represent is essential.<\/span><\/p>\n

<\/span>Who Determines the Star Ratings?<\/span><\/span><\/h2>\n

Star ratings are typically assigned by <\/span>independent rating agencies<\/b> like Morningstar, Value Research, and CRISIL in India or their counterparts globally. These agencies assess funds based on performance metrics, expense ratios, volatility, and <\/span>risk-adjusted returns<\/b>.<\/span><\/p>\n

It\u2019s important to note that different agencies may use slightly different methods and time frames. This means a fund may have a 4-star rating from one agency and a 3-star rating from another, depending on their internal methodology.<\/span><\/p>\n

These rating agencies aim to offer unbiased insights to help both retail and institutional investors.<\/span><\/p>\n

<\/span>What Factors Influence Mutual Fund Star Ratings?<\/span><\/span><\/h2>\n

Star ratings are generally based on a fund\u2019s <\/span>past performance<\/b> adjusted for the level of risk taken. This is known as a <\/span>risk-adjusted return<\/b>. For instance, if two <\/span>equity funds <\/b><\/a>gave the same returns over five years, the one that achieved those returns with less volatility or risk might get a higher rating.<\/span><\/p>\n

Some of the common metrics used to calculate fund star ratings include:<\/span><\/p>\n