Morningstar Review

If you’re anything like me you’ll have an insatiable appetite for investment news and commentary. I seem to be on a never ending quest to find that little piece of missing information for my next investment opportunity.

But where do you start looking? You could try the Wall Street Journal or CNBC, but sometimes these two well respected organizations have opposing views on a current situation, and this happens a lot! Just look at Ben Bernanke’s recent comment on the US economy.

One of the best ways to overcome this problem is to find one resource that you trust above all others and base your investment decisions on information provided by them and them alone.

Paying for Your Information

If you’re a serious investor you’re much better off paying for your information, no I don’t mean handing over envelopes stuffed full of cash, for the inside line of a mergers deal. I mean paying for a subscription service.

There are a number of services you can choose from but one of my favorites is Morningstar Premium. Morningstar is a well respected organization with many leading commentators, they offer a full investment advisory service for only $185 per year.

For that very reasonable fee you’ll get access to unbiased portfolio analysis, selective investment picks, decisive portfolio management, actionable analyst insights and much more.


The Morningstar Advantage

But the main reason for choosing Morningstar is their rating system. The Morningstar rating is a risk-adjusted, cost-adjusted comparison of each investment funds historical performance going back ten years. Of course as the disclaimer says, historical performance is no guarantee of future earnings so you shouldn’t make investment decisions using this rating alone.


But what it can do is help you narrow down the field of prospective funds worthy of further investigation. Morningstar’s rating system takes into account a minimum of three years performance; this helps weed out the fly by night performers with strong short term gains but little long term track record.

It’s always advisable to check out how a rating system works before you start trusting its figures. Whilst a detailed analysis is beyond the scope of this article, I’ll cover the basics of what it tells you and what it doesn’t.

The Morningstar rating system takes into account past performance figures covering three, five and ten years. Funds that perform well over the short term are therefore not included.

What it won’t tell you is the respected fundamentals of each fund. Things like fund management changes, basic investment philosophy and investment strategy changes can all have an adverse affect on funds performance going forward. The Morningstar rating system does not take these changes into account when compiling past performance figures.

These are the kinds of things you need to look at in greater detail once you have a shortlist of potential funds to investigate. You don’t want to be investing in a fund that’s recently had a change of fund manager for instance, not least until he’s proved his worth.

Fortunately Morningstar helps you with this kind of research as well; all changes in a funds management as well as any news regarding that particular fund are kept track of. Morningstar makes this information easy to find, displaying it on each funds detail page.

You can then use this information to narrow down your search of potential funds even further. You need to be looking at the quality of the fund management team and their longevity. If a fund has recently gone through management changes then it’s probably not a good time to invest despite a good previous record.

You should also monitor the kinds of stocks a fund invests in, are they a technology based fund? If they are, then take a look at the long term outlook of the technology sector before investing.

By utilizing the Morningstar rating with other fundamental analysis you should be able to choose an excellent fund which outperforms the S&P 500 on a regular basis. Of course once you’ve selected a fund you can’t sit back and relax. You need to constantly monitor their performance against other funds in the same sector. Morningstar is perfect for this too.

You can sign up for a 14 day FREE trial of Morningstar Premium here, you’ll soon learn the value of this service and it’s sure to payback your initial investment back many times over.

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