Fund Rating Agencies – CRISIL, Morningstar: Should You Trust Them?

Introduction

 “5-Star Fund!” Sounds tempting, right? But are fund ratings reliable indicators of future performance?

In this blog, we unpack how fund rating agencies like CRISIL and Morningstar operate, what goes behind those stars, and how much you should trust them.

What Do These Ratings Measure? 

  ⭐ Morningstar Ratings

• Based on past risk-adjusted returns over 3–5 years
• Risk metrics include volatility, drawdowns, Sharpe ratio
• Funds are ranked within their category

• Use quantitative + qualitative filters

• Consider portfolio quality, consistency, and liquidity
• Rank funds from 1 (best) to 5 (lowest)

1. Backward-looking – Based on past data, not future strategy
2. Category-relative – A 5-star mid-cap fund isn’t better than a 3-star large-cap
3. May ignore fund manager changes or strategy shifts

Conclusion 

 Star ratings can be a useful starting point, not the final decision-maker. Use them alongside your own fund analysis for smarter investing. 

 Don’t just chase stars. Compare, understand, and invest with clarity.

Quick Comparison Table: CRISIL vs Morningstar