Rated Funds That Win Only Half the Battle
Low fees are important, but not enough to get these rated funds a medal.
Study after study has shown that expenses are the most reliable indicator of future mutual fund returns. But even low costs don't guarantee success. Often, low fees are not enough for an actively managed fund to earn a Morningstar Analyst Rating of Gold, Silver, or Bronze. Besides reasonable fees and a solid track record, a fund also has to have a solid, repeatable process and competent, shareholder-focused stewards at the helm. Changes or deficiencies in those fundamental traits can outweigh an attractive price tag. To illustrate, here are five funds whose low fees give them an enormous advantage over their rivals; however, they have Neutral Analyst Ratings because of questions about other critical factors.
The Vanguard name is synonymous with low fees, but that's only half the battle at two of the giant mutual fund family's actively managed quantitative funds. Vanguard Strategic Equity (VSEQX) and Vanguard Growth & Income (VQNPX) are among the cheapest non-index-fund options in their respective mid-blend and large-blend Morningstar Categories. Despite that advantage, they are rated Neutral because they have yet to impress over a full market cycle.
Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.