How Does Morningstar Rate Vanguard Mutual Funds?


Quick Answer

Morningstar rates four asset classes in the Vanguard Mutual Fund Family using asset-weighted averages for fund returns from the previous three years, according to Morningstar's official website. The company calls the rating the Family Fund Score.

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Full Answer

The asset-weighted averages of a fund company's Morningstar ratings, also known as star ratings, indicate overall ability. There are four categories of asset classes. The averages account for the quantity of funds a firm manages within an asset class in addition to the asset amount within each fund. Because investors typically put more money in best performing funds which then grow at a faster rate, Morningstar uses asset figures for each fund from the prior three years in its scoring system also, its website explains.

In July 2015, Morningstar rates Vanguard's municipal bond funds at 4.1, domestic stock funds at 4.0, taxable bond funds at 3.4 and international stock funds at 3.0. A score below 2.5 indicates poor performance, notes Morningstar. A score between 2.5 and 3.5 indicates the firm has an above average record of performance. Any score above 3.5 indicates the firm has good success managing the funds within the class.

In addition to the scoring system, Morningstar analyzes and provides information on stocks and funds. Access to reports, news and detailed data is available for a subscription fee. As of July 2015, an annual membership costs $199, according to Morningstar.com.

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