Category Rating

Like the Morningstar Risk-Adjusted Rating (more commonly called the star rating), the Morningstar category rating is a quantitative measure of risk-adjusted returns. This three-year rating shows how well a fund has balanced risk and return relative to other funds in its Morningstar category (see definition below). The category rating uses the same methodology as the star rating; however, the category rating does not reflect any front- or back-end loads. Other expenses, such as 12b-1 fees, are included. As with the star rating, 5 is the best rating and 1 is the worst.

Category Risk

A statistic that evaluates a fund's downside volatility relative to the other funds in its Morningstar category. To calculate risk, Morningstar concentrates on those months during which the fund underperformed the average return of a three-month Treasury bill. We add up the amounts by which the fund fell short of the Treasury bill's return and divide the result by the total number of months in the rating period. The fund's average monthly loss is then compared with the average monthly loss for the fund's Morningstar category. The resulting risk rating expresses how risky the fund is relative to the average fund in its Morningstar category. The 10% of funds with the least risk in each Morningstar category earn a Low category risk rating, 22.5% earn Below Average, 35% Average, 22.5% Above Average, and 10% High. Unlike the overall Morningstar Risk statistic, category risk is calculated only for a three-year period.

Category Return

A statistic that compares a fund's excess return over the risk-free rate (as measured by the return on Treasury bills) to the average excess return for the Morningstar category. With the return on Treasury bills set as the benchmark, the bottom 10% of funds in each Morningstar category earn a Low category return, 22.5% Below Average, 35% Average, 22.5% Above Average, and 10% High. If the average excess return of the category is below the return of the T-bill, the return of T-bill alone is used as the benchmark. Unlike the overall Morningstar Return statistic, loads are not accounted for in the category return. Category return is calculated only for a three-year period.