During the 1980 Presidential campaign Ronald Reagan asked voters one simple question for which the answer catapulted him into the White House. He asked people:
“Are you better off today than you were 4 years ago?”
I believe there is a similar, vital question that investors can ask themselves after this tumultuous bear market. And that is…
“Are you happy with your mutual fund ranking system?”
On the surface I know it doesn’t seem quite as profound. Nor will it help my chances of becoming President. But think about it this way. You probably have the majority of your life’s savings invested in mutual funds. And you most likely selected those funds based upon just one firm’s rating system.
So, if you believe that rating system is helping you successfully grow your wealth, then there is no need to read the rest of this article. However, if you wonder if there is a better way to bolster the performance of your life’s savings stored in those mutual funds, then read on.
Introducing the Zacks Mutual Fund Rank- Another Breakthrough for Investors
Zacks Investment Research has a history of creating innovations that truly help investors outpace the market. This started back in 1979 when our founder, Len Zacks PhD, discovered that earnings estimate revisions were the most powerful force that impacts impacting stock prices.
To exploit this force, he created the Zacks Rank stock-picking system. Thirty years and billions of dollars in trades later, it has more than tripled the S&P 500 with an average yearly gain of +26%.
Since 1979, we’ve launched numerous innovations for investors, but none on par with our latest achievement. So now, after rigorous testing, we have isolated a number of factors that help us spot funds set to outperform. These unique “factors” are what makes the new Zacks Mutual Fund Rank so powerful.
At this stage, I’m sure you have three main questions. First, how does the mutual fund rank work? Second, how are the ratings created? Third, where can I see the rank for my funds? Your wish is my command.
How Does the Zacks Mutual Fund Rank Work?
Our new ranking system covers over 18,000 mutual funds. These funds are ranked on a scale from 1 to 5, with 1 being the best funds to own for the future and 5 being the worst.
| Mutual Fund Rank | Rating |
| 1 | Strong Buy |
| 2 | Buy |
| 3 | Hold |
| 4 | Sell |
| 5 | Strong Sell |
Why did we use this scale? Two reasons:
- The Zacks Rank for stocks employs the same 1 to 5 rating system and we wanted continuity between the two systems for the convenience of our customers.
- The most popular fund-rating systems give #5 ratings to their best funds and yet history shows that these systems don’t help investors pick better funds. So we don’t want to follow their path.
How are the Ratings Created?
Every month we update the Zacks Mutual Fund Rankings based upon an exclusive process created by our founder Len Zacks and the Zacks Quantitative Research Department.
We have two different fund systems to create the best mutual fund ratings. One system is exclusively applied to US stock based mutual funds and the other is used for all other funds. Below are explanations for each.
US Based Stock Mutual Fund Ranking System: The key to this ranking system is that we evaluate the average Zacks Rank for the stocks owned by the fund. We blend this with other criteria that our studies show are beneficial in finding funds that will outperform in the future. In general, the higher the average Zacks Rank for the stocks in the fund, then the higher the Zacks Mutual Fund Rank.
Why is this a better process than other mutual fund rankings? Because the Zacks Rank has proven itself to be one of the best stock-rating systems ever invented. So if a fund manager is buying more highly-rated Zacks Rank stocks, then it shows that the manager has the expertise to buy stocks with qualities proven to beat the market. This leads to an increased likelihood that the fund will outperform its peers in the future.
To long time Zacks customers, you already know why the Zacks Rank helps pick superior stocks. And thus its application to mutual fund holdings makes perfect sense. If you are not familiar with the Zacks Rank for stocks, learn more with free articles and video resources in our Zacks Rank Education Section.
All Other Mutual Fund Ranking Systems: Len Zacks has isolated a number of key factors that will help find funds that will outperform. These factors include measures of a fund’s past performance along with some quality attributes.
Our tests to date show that these two systems will help investors pick better funds. Over time, Len Zacks and the research team will review the success of the model and make any and all adjustments to wring out additional gains for investors.
Where to Find the Mutual Fund Rank on Zacks.com?
We have a number of free and premium resources that will allow you to tap into the power of the Zacks Mutual Fund Rank. All of them are available on the Zacks.com Funds Page.
On the free side of the ledger, you can find the Zacks Mutual Fund Rank for any of your funds on our quote pages. Just enter any mutual fund ticker symbol in the Zacks.com quote search box. That will take you to the quote/profile page for the fund where you will clearly see the Zacks Mutual Fund Rank.
Also for free, we write a number of weekly articles highlighting the Top 5 funds by category and by fund family. This can help you discover some great new funds to invest in now.
We also have a number of excellent resources that are part of our Zacks Premium service. Here are some of those top features:
- Find all rated funds in 42 categories and for 500+ fund families
- Check for similar funds. Enter any fund ticker and you’ll see its peers that may have higher rankings.
- Compare funds. Enter up to 5 mutual funds and size up key differences at a glance
- Screen for Best Funds: Use our robust, but easy-to-use mutual fund screener to find funds that meet your unique criteria.
If you made it this far, then it probably means you are not fully satisfied with your current mutual fund rating system. And hopefully I have made a solid case that the new Zacks Mutual Fund Rank could help you take better care of your life’s savings invested in mutual funds.
If that is true, then I invite you to take a free trial to our Zacks Premium service to gain full access to all of our mutual fund ranking resources (and stock ranking resources too). Just follow the link below to learn more.
Start Zacks Premium Free Trial
Good Investing,
Stephen Reitmeister
Steve runs Zacks.com and is its Editor-at-Large. You can learn more about his market insights by viewing our” Zacks Roundtable Review” and “Investing the Zacks Way” videos. Zacks Investment Research
