The Morningstar Category™ classifications were introduced in 1996 to help investors make meaningful comparisons between mutual funds. The categories help investors identify the top-performing funds, assess potential risk, and build well-diversified portfolios. …

What are Morningstar sectors?

The Cyclical super sector has four sectors: Basic Materials, Consumer Cyclical, Financial Services, and Real Estate. The Defensive super sector has three sectors: Consumer Defensive, Healthcare, and Utilities. The Sensitive super sector also has four sectors: Communication Services, Energy, Industrials, and Technology.

What is the purpose of Morningstar?

Morningstar was founded in 1984 to provide investors with useful information for making intelligent, informed investment decisions. The company’s first product, originally named the Mutual Fund Sourcebook, proved to be innovative in its ability to tap into an under-served market.

What does a Morningstar 3 star rating mean?

Morningstar Rating Periods Rating is completed for funds with more than three years of historical performance. If a fund has less than three years, it is not rated. A fund with only three years of historical performance will receive an overall star rating that is the same as its three-year star rating.

How do you read Morningstar risk ratings?

Understanding the Morningstar Risk Rating In the risk rating process, 10% of a category’s funds with the lowest measured risk are rated as low risk. The next 22.5% are rated below average, the middle 35% are average, the next 22.5% above average, while the top 10% are rated as high risk.

Which sectors are defensive?

Due to the constant demand for their products, defensive stocks tend to perform better in a declining market. There are three main defensive sectors: Utilities, Consumer Staples, and Health Care. Utilities: Water, gas, and electric utilities are needed in all phases of the business cycle.

How reliable is Morningstar?

Morningstar’s rating systems are reliable and, very important, unbiased. Their famous star rating is in fact relatively straight-forward. Using specific metrics, Morningstar creates peer groups and then assigns the stars according to each fund’s performance against its peers. The star rating looks back at performance.