Does a high rating, for instance, really mean a fund will do better in the future? Many investors seem to think so. But they're often disappointed.
Studies have shown that Morningstar, North America's most recognized rating system for funds, has a tremendous influence on fund sales with more than 80 per cent of all money flowing into funds going into those carrying four- or five-star ratings from the Chicago-based researcher and its Canadian division.
In many cases, that means fund buyers are chasing performance - which is like driving a car while looking through the rear view mirror - it seldom works well. What's worse, more money to manage doesn't always translate into higher returns for investors.
Is now a good time to buy a house?
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- Yes, prices will continue to rise.
- No, Canada is facing a housing bubble and prices will eventually fall.
- I don't know.