Chicago-based investment-research firm Morningstar has introduced a ranking system for mutual funds to support its closely monitored one- to five-star ratings, Chicago Tribune reports, citing The Wall Street Journal. The system gives funds a gold, silver, bronze, neutral or negative ranking and forecasts which funds will outdo their peers in the future. The star ratings are awarded partly on the basis of past performance after adjusting for risk and sales charges.

The stars are extensively used by investors and financial advisers in selecting funds and often are classified as promotional materials. The ratings also use other quantitative and qualitative measures such as the fund's expense ratio, Morningstar's perception of the fund manager, the fund's parent company and investment strategy. Of the 349 funds that the firm already has rated, 155 received the highest "gold" rating, while eight were given a "negative" rating.

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