Morningstar Review: Pros, Cons and Key Features
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The bottom line: Morningstar Investor offers retail investors access to trusted research, analysis and portfolio-building tools for $249 per year ($199 for NerdWallet readers). A free 7-day trial allows potential customers to preview the service.
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Fee: 7-day free trial; then $249 per year Promotion: Subscription is just $199 for NerdWallet readers ($50 off)
Paid subscription thereafter, see Morningstar.com for details.
Access to world-class investment picks, research, analysis and data.
Easy to navigate interface with some customization options.
Some ratings only look backward at past performance.
Screener tools can be a little confusing and clunky.
Morningstar’s research, expertise, analysis and tools are trusted among the largest investment firms in the world, and this same insight is available to retail investors through Morningstar Investor. At $249 per year ($199 for NerdWallet readers), it’s not for hands-off, set-it-and-forget-it investors. But if you’re ready to start choosing your own stocks, mutual funds and exchange-traded funds, want to manage your own portfolio and identify diversification opportunities, Morningstar Investor could be a worthwhile investment.
Morningstar began providing its Morningstar Rating for mutual funds in 1985, and since then has continuously added more features and enhancements, culminating in the Morningstar Investor offering available today. While Morningstar Basic does offer limited access to some screeners and portfolio management tools, the Analysts Reports, Top Investment Picks and full suite of investment management tools offered through Morningstar Investor will appeal to investors actively managing their own portfolios.
To be clear, Morningstar is not a brokerage. It’s an independent source for unbiased research, analysis, commentary and insight to help investors make a range of decisions, from individual investment picks to asset allocation. While there is some overlap between the research and analysis brokerages provide and Morningstar’s services (and indeed, many brokerages make research from Morningstar and other providers available to account holders), the depth and breadth of Morningstar’s Investor service is a strong supplement to help investors confidently make decisions.
Morningstar Investor is best for:
Morningstar Investor at a glance
Ratings, rankings, picks, analysis, research, commentary, investment tracking
Number of funds analyzed
Types of securities researched
Stocks, ETFs, bonds, mutual funds
NerdWallet readers pay just $199 ($50 off).
Morningstar Investor features you should know
Morningstar ratings: Morningstar’s star rating system is widely used to help investors choose among the thousands of mutual funds available. The 1-5 rating is based on the fund’s risk-adjusted historical return and is generated entirely by mathematical measurement — not human analysts.
The formula is complex, but suffice it to say, it’s a reliable way to determine how well a fund has performed historically given the level of risk investors take on when buying it. Funds are divided into categories, and a star rating of 5 represents the top 10% of the funds in that category with the highest risk-adjusted returns. The next 22.5% of the funds in that category are given 4 stars, the next 35% get 3 stars, and so forth.
While this rating is a great place to start your research, it’s important to point out that these ratings are backward-looking, and past performance is never a guarantee of future success.
Analyst insights and picks: This is where Morningstar’s Investor offering really bests the free offering. More than 150 independent, unbiased analysts provide commentary and insights on mutual funds, stocks and ETFs.
This includes analysts’ ratings that are qualitative and forward-looking, giving funds a rating of Gold, Silver, Bronze, Neutral and Negative. The higher the rating, the more the analyst believes the fund will outperform over a market cycle. The lower ratings of Neutral and Negative show an analyst lacks certainty in the fund. This also includes roundups of analysts’ top investment picks, listed by investment type and financial goal.
Investment tracking: Morningstar’s Portfolio Manager helps you properly diversify your holdings, evaluate asset allocation and sector weightings and track your financial goals. Members also have full access to the Portfolio X-Ray, which includes a dozen tools to help you zero in on an allocation and level of diversification that’s right for you.
Screeners: Screen thousands of stocks, ETFs and mutual funds to find the investments that fit your specific criteria. You can also save screening criteria, so you can find those investments with just a few clicks the next time around. However, if all you’re hoping to get out of Morningstar Investor is its screener tools, the subscription may not be for you; many of the major online brokerages have equally robust screening tools.
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Is Morningstar Investor right for you?
If you’re actively managing your own portfolio, Morningstar’s research, analysis, insights and commentary can help you gain confidence in picking investments, setting an asset allocation and building diversification. It’s also an excellent way to learn about investments and portfolio management if you’re considering going the DIY route and haven’t started yet.
However, it’s always prudent to consider your return on investment. Do you expect the investment decisions you make, informed by Morningstar, to offset the annual cost? If so, Morningstar could be an extremely valuable tool for you, especially as your investment balance grows over time. But if you’re only investing small amounts of money (keeping potential returns small, too), the cost may not be worth it for you.