We've created our rating system to help you understand how well each fund has been doing relative to similar funds over the past five years, in terms of both risk and reward. In our view, funds that take higher risk must produce higher rewards just to rate as equally attractive to funds that take lower risk, even though they produce lower rewards. So we set out to quantify and summarize these concepts in a single rating.
Many investors hold differing views of what constitutes risk.
We consider the riskiness of a fund best described by some measure of its volatility in other words by how much a fund tends to differ in the short term from its longer-term performance. And if you don't plan to hold a fund for the exact reporting periods quoted in the media or in the fund's advertising, you might experience results far different from those reported. To rate a fund, then, we analyze two aspects of its past performance returns and volatility and combine them into a single, comparative rating. First, we've separated all funds into five categories Canadian Equities, International Equities, Fixed Income, Balanced and Money Market. While not perfect, these categories at least help us compare funds with similar funds.