investing

5 investing myths debunked

5-star funds guarantee good returns
5-star funds guarantee good returns © OkFoto/Shutterstock.com

5-star funds guarantee good returns

A fund earns a five-star rating from mutual fund rating and consulting company Morningstar by spectacular past performance. And as all investors should know, past performance is no indication of future results.

"There is no evidence that superior performance persists. If you buy a top-performing fund, you have no better than a random chance that it will post above-average performance," says Mary Ellen McCarthy, Ph.D., founder and principal of Responsible Investing of Brookline, Massachusetts.

If you're in the market for an actively managed fund, start with the star rating. But don't buy a fund based on the money it made other people last year.

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