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Theologically speaking, a term "The Left Behind" describes those of us who will miss what's called the "Rapture," a lift up to heaven at the time of some future world apocalypse. For my part, I'm more preoccupied with being "Left Behind" by the stock market when it mounts its resurgence.

Where do we go for some help that will give us an edge going forward? Certainly not from mutual fund advertising. A pet peeve of mine involves the amount of media space purchased by mutual funds with what could otherwise have been our money. For objective data, we should turn instead to mutual fund ranking services like Morningstar.

However, at first glance, the fund rating services appear to have failed us. Mark Hulbert, an analyst with 25 years of experience as a debunker of investment advisor pomposity, pointed out recently (in a New York Times column) that the entire market was down. None of the market guidance products such as Morningstar or Value Line managed to steer adherents toward any safe havens.

One of the interesting aspects of this market has been the absence of any single investment type bucking the market. By comparison, in the crash of the early 2000's, there were small cap and REIT funds that started earning 20 percent per year in 2000 and continued that performance right through the deluge that swamped everything else. This time out, nothing.

With respect to stock funds, almost everything seemed to lose about 22 percent in the fourth quarter. This supports my contention that the market downturn was primarily driven by the supply and demand for stocks in general rather than an abandonment of weak or overpriced industries (think "dot-com" in 2001 or "nifty-fifty" in the 70's.)

A rebalanced collection of Morningstar's five-star rated funds lost 22.3 percent while the Dow Jones average lost 22.9 percent.

At my company, where we monitor the returns of 401(k) plans, we had similar results when comparing high Morningstar-rated fund selections against those of funds chosen with little regard for ratings - the latter case being a single fund company's offerings with star ratings averaging about three.

In down markets, we find the difference to be about two percent better (for the five-star funds.) In happier days, with rising markets, we found that a collection of four and five-star rated funds actually earned about three to five percent better results when we compared weighted averages. Paying attention to the stars can actually lead to improved results.

At Morningstar, star ratings range from five stars down to one star, and they signify that, for example, a five-star rated fund has generated results in the top 10 percent of its competitors of the same fund type.

A four-star rating has outperformed 67.5 percent of competitors and a three-star is good for beating 35 percent, and two stars (beating 22 percent) are pretty much at the bottom. One star is the bottom 10 percent of funds.

So, what contributes to the star rating? It begins with a five-year "look-back" of performance with results of more recent years weighted more heavily than those four to five years ago. Beyond the percentage performance weighting that gives heavier weight to recent years, a variety of risk-adjusted measurements are layered over the raw percentage performance numbers.

"Risk-Adjusted Performance" describes a technique for measuring investment performance beyond just comparing past average annual returns.

Risk-adjusted performance allows the comparison of two funds, for example, whose returns are the same, but it will reward the fund with steady gains and penalize the fund with volatile highs and lows. It recognizes that the volatile fund only managed the same average annual results because the "music stopped" at one of that fund's occasional high points. For most investors, steady returns yield better results because they offer a higher degree of predictability.

The terms "alpha" and "beta" represent measurements of the extent to which a mutual fund will exhibit volatile swings in value or just proceed more predictably up an inclined plane of growth when the market begins to recover.

Applications of these arcane statistical equations cannot tell us prospectively what fund will be next year's winner, but they do help us determine which fund might be more predictable than another.

Research indicates that predictability combined with higher percentage past performance will increase our chances of winding up with more future winners.

Academic tools, reflected by meaningful star ratings, can bring some smug satisfaction when choosing investments in turbulent times.

Judicious use of these measurement tools can help us avoid being left behind when the market takes off an experience of rapture to which we can all relate.

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