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Well said, Fuskie, but let me clarify a bit.

5) Morningstar Rating. I never hurts to get the advice of a professional and Morningstar has a long history of analyzing mutual funds. A fund rating of 5 Stars is desired, 4 acceptable, but you might want to think twice about 3 or lower.

A Morningstar fund rated 3 stars is average. A professionally managed fund that does as well as its peers is OK with me. But one with 2 stars or less is an under performer, which should be avoided.

I'll agree that funds that are consistently rated 4 or 5 stars are clear winners, but the problem is that most 5 star funds fail to repeat. Hence, they had a lucky streak but are not truly better than the pack.

4 or 5 stars is not a good predictor of future performance. But consistently average performance is OK by me. Its the underachievers I worry about.

But this is personal choice. Either way can work. You decide which is best for you.
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