Smaller companies, by which I mean the ones with market capitalizations below $20 billion, have done well in the past few years. This streak has to end someday--sooner rather than later, I'd wager.
Then, portfolios with large capitalizations will come to the fore. Which ones to buy? Why, the large-cap funds with the best ratings, of course. Fund tracker Morningstar's star rating system is a widely used guide, so its best-rated funds (five stars) are very popular.
In too many cases, however, the fine performances that earned them those stellar ratings are deceptive. Many large-cap managers with five stars have gotten them by dabbling in mid-cap and small-cap stocks or large caps at the bottom of the category's range, thus jazzing up returns.
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Then, portfolios with large capitalizations will come to the fore. Which ones to buy? Why, the large-cap funds with the best ratings, of course. Fund tracker Morningstar's star rating system is a widely used guide, so its best-rated funds (five stars) are very popular.
In too many cases, however, the fine performances that earned them those stellar ratings are deceptive. Many large-cap managers with five stars have gotten them by dabbling in mid-cap and small-cap stocks or large caps at the bottom of the category's range, thus jazzing up returns.
Read the complete column
