It's an improvement upon looking at total returns alone because it brings risk into the equation and because it is long-term oriented. But it doesn't address whether a fund duplicates what you already have or provides true diversification. The line we use about the star rating is, it's an introduction, not a conclusion. I would add that it should be a fleeting introduction. Sounds pretty simple.
People look for a free-lunch answer.
I can't tell you that. I do think if you watch your costs and taxes, look for funds from families with a history of above-average performance, and are choosy in your selection, you can improve your performance. But there aren't any guarantees attached with that. There certainly are guarantees attached with saving more. In terms of trading less, most trades occur after the fact.