Morningstar gets good grades on its three-year report card following major changes in how it rates mutual funds. According to Mark Hulbert of The Hulbert Financial Digest, mutual funds that were highest rated with five stars by Morningstar outperformed lower-rate funds, and since the changes were introduced in 2002, the average five-star rated domestic fund slightly outperformed the Dow Jones Wilshire 500 Index, 10.1% to 10%.

While it appears that the highest-rated fund reported the greatest inflows and the lowest rated one had the biggest redemptions, says Hulbert, Morningstar stresses that investors should not live by stars alone.