Making the Most of Morningstar: Introduction

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Morningstar.com offers a wealth of free and paid tools, research and analysis of stocks, bonds and mutual funds. As useful as this information can be, however, it can feel like information-overload or just plain confusing. For example, when I first started using Morningstar, I had many questions:

• what does the Morningstar Star ratings mean and should I ever buy a fund with lower than 3 or 4 stars?
• What is the Morningstar Style Box and how, if at all, do I use it to make investing decisions?
• What’s the difference between the total return of a fund and the investor’s return?
• What is the “X-ray” analysis?
• What does Morningstar offer besides research and analysis?

The answer to the last question is plenty and will be a major focus of this series. Before we get to that, however, let’s cover the basics. Morningstar’s services basically can be broken down into the following 5 categories:

1. Research: You can research mutual funds, stocks, ETFs, and even hedge funds. In the top left of the Morningstar home page, just type in the ticker symbol in the “Quote” box and, if you’re like me, you will generate more information than you’ll not what to do with (we’ll talk about how to use much of that research later in this series.
2. Analysis: You can track your portfolio for free with Morningstar and generate a lot of analysis about the make-up of your investments. For example, you can find out just how diversified your investments really are and how much your portfolio as a whole costs in fees.
3. News: You can track news about the markets, individual stocks and funds, and even personal finance articles.
4. Reports: Morningstar offers analysts reports on funds and stocks that are available for a fee.
5. Discussion: Morningstar also as a number of excellent discussion threads that cover a wide range of investing issues.

Morningstar has three levels of access: unregistered, free member and premium member. Even unregistered access provides a substantial amount of information, including financial data on mutual funds and a basic mutual fund and stock screener (many of these tools will be described in later posts). As a registered user, Morningstar makes several other features available, most notably a portfolio manager that enables you to track your investments and, more importantly, to use various tools to analyze your portfolio. And the premium paid membership adds even more research and analysis tools, such as Morningstar’s X-Ray analysis that allows you to see in detail the stocks that all of your mutual funds own. A chart of the features for each level of access can be viewed here.

Because we will be using the portfolio manager feature that is available to registered users, if you are not registered, you can do so at Moringstar.com (here is a direct link to its registration page). Registration is free and takes just a minute to complete.

The next post in this series will describe how to input a portfolio into Morningstar.

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