Rating Risk

Fundamentals of Market Investing by Adam J. McKee

Most stocks, bonds, and funds are constantly being rated by particular analysts or analytics firms such as Morningstar.  Investors pay attention to these ratings, and a “downgrade” can cause a steep decline in the market price of a stock.  long-term investors need not worry much about ratings if they have done their homework and know that the company is in good standing.  Analysts frequently get it wrong, and different analysts often disagree.  If you Google “analyst consensus on XYZ”, you will find that some analysts say you should be buying the stock of XYZ, and others say you should be selling it.

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