If you've been investing for any length of time, you've probably heard of Morningstar. The company is famous for providing ratings on mutual funds, that are widely respected and heavily relied on throughout the industry.
But now with Morningstar Premium, you'll be able to take advantage of the insights and analyses the company provides to help you improve your investment performance.
The next question you might ask: “Is Morningstar Premium worth it?”
What is Morningstar?
Based in Chicago, and founded in 1984, Morningstar is an investment research firm. It’s considered to be one of the most influential in the industry. The company provides ratings and other information, as well as tools, to help investors make more informed investment decisions.
As an asset management company, it has more than $220 billion in assets under management.
It rates mutual funds using 1-5 stars, with a five-star rating as the highest. The ratings are consistent with the returns offered by funds in each star class.
Morningstar Premium, which is the product we'll be reviewing, provides individual investors with access to news, analysis, and research of stocks, bonds, exchange-traded funds (ETFs) and mutual funds.
How Morningstar Premium Works
Morningstar provides analysis and ratings of individual securities like stocks, bonds, and ETFs; but its main focus is mutual funds. The service will mainly benefit long-term, buy-and-hold investors, whose investing activities will be best served with mutual funds.
Morningstar Premium is a subscription service that will give investors access to detailed information on various investment types. It will also provide ratings on mutual funds to help you select the ones that will work best in your portfolio.
The service comes with screening tools to help you narrow down which funds you might want to invest in. Services are available for both free and premium accounts.
As you can see, the free service is fairly limited but it's enough to let you get a feel for the service. If you want analyst reports and top investment picks, Morningstar Premium costs $199 per year. There are discounts if you subscribe for multiple years.
What do you get with Morningstar Premium?
Morningstar Premium Tools and Features
The service provides tools and worksheets to help you prepare for investing. Examples include a budget worksheet, goal planning worksheet, net worth worksheet, and personal cash flow statement. It's clear Morningstar focuses on your big-picture financial situation.
They also offer what they call “Morningstar Investing Classroom,” a self-study course, that teaches you about: stocks, mutual funds, ETFs, bonds, and even proper portfolio construction. You'll also have help to familiarize yourself with the hundreds of investing terms through the “Investment Glossary.”
Analyst reports provide an in-depth summary of what Morningstar analysts think about a particular investment. The analysts come up with a forward-looking assessment of the investment's prospects. They compare it to both it's Morningstar category as well as its benchmark.
The Morningstar report is quite comprehensive but the value is in the Full Analysis. In just a few minutes, you can get caught up to speed on the state of the business right now as well as where it might be and likely will be going.
The Full Analysis includes:
- Analyst Note
- Business Strategy and Outlook
- Economic Moat
- Fair Value and Profit Drivers
- Risk and Uncertainty
For example, Apple's Analyst Note, written by Abhinav Davuluri (the Sector Strategist) report recaps the latest quarterly financial report as well as integrating everything Apple has said leading up to it such as when they revised (and in this case, rescinded) earnings guidance and projections. It's more than just a recap of an earnings call, which you can find anywhere, it puts it in context.
The Business and Strategy Outlook, which is dated October 30th, 2019; is also written by Davuluri but it puts everything in context so you can understand the why behind a company. Why does Apple do well? “Apple’s competitive advantage stems from its ability to package hardware, software, services, and third-party applications into sleek, intuitive, and appealing devices. This expertise enables the firm to capture a premium on its hardware, unlike most of its peers.”
If you noticed, Apple has just two stars in the listing above. This is not an indictment of the company but the valuation. For each stock, they calculate a Fair Value (3 stars) and they've determined that Apple is overvalued at a 20% premium – thus it's just a two-star stock pick. With Premium, you also get a star rating, economic moat, stewardship grade, and fair value uncertainty.
If you knew nothing about Apple, reading this full analysis would give you an understanding that you couldn't get anywhere else this quickly.
Not every company has analyst reports. In some cases, like ADT Inc, Morningstar uses Quantitative ratings to compare a company to its peer companies that do have ratings. You'll see a small Q next to the star rating:
Best Investments and Fund Analysis
If you're struggling with selecting the best funds for your portfolio, this feature provides what Morningstar determines to be the best investment ideas compiled from 220 independent analysts. Categories include five-star stocks, ETFs, funds, high-yield bonds, core bond funds, foreign bond funds, US index funds, foreign index funds, bond index funds, “inflation fighters”, target-date funds, and starter funds.
What does Morningstar tell us about mutual funds? Let's dig into VOO, Vanguard's S&P 500 ETF:
The analysis of a fund includes a summary, followed by a look at the fund's Process, People, Parent, Performance, and Price. The Process section for an index fund isn't that interesting, as it just tracks the index, but it was interesting to read the People as they discuss the fund managers.
To be 100% honest, I've never looked at the managers of a fund, certainly not an index fund. It was interesting to read to get a little behind the scenes about how Vanguard does it (“Vanguard has a culture of promoting from within, as members of the Index Analytics team have been promoted to portfolio management and trading.”) but not something that I would need to invest.
If you prefer individual companies, another way to look at some of their best picks is to look at the 5-Star Stocks – these are companies that Morningstar has determined are priced lower than their Fair Value. You can then sort these companies by the Fair Value Uncertainty for the level of volatility you're willing to accept in an investment.
The portfolio manager lets you track your investments, evaluate your strategy, and create watch lists of potential opportunities. The value is that it pulls in the Morningstar reports as links into the table so it's easy for you to see them on a page. It's one of the reasons why we list it on the list of best portfolio analyzers.
I put in a test portfolio:
Once you've built your portfolio, this tool evaluates your asset allocation as well as sector weightings. It looks to reveal concentrated positions as well as the stock holdings in your mutual funds. This will help you to avoid duplication of the same companies in your portfolio (or at least lets you know when it happens).
Our test portfolio of just Apple doesn't yield that interesting of an X-Ray! 🙂
Morningstar offers its “Basic Fund Screener.” It's a tool that enables you to search and filter mutual funds by category, ratings, or performance. You can use the screener to find the best funds to fit within your chosen investment criteria.
The “Premium Fund Screener” enables you to search and filter mutual funds by category, analyst grade ratings, or performance. Specific criteria include Morningstar rating and risk, sustainability, annual returns, trailing returns, load adjusted returns, tax cost ratio, yield, and a host of other criteria. (This tool is not available on the free version.)
Another valuable tool is the “Similar Funds” feature. It will provide you with a list of funds similar to the ones you isolate through the fund screeners, giving you a greater choice of funds.
There are also screeners available for stocks and ETFs.
Morningstar Premium offers various planning tools. It includes tax planning, personal finance, saving for college and retirement, as well as investing for retirement. Most of these planning tools involve a series of articles related to the particular planning activity.
Another useful screener is their Similar Funds tool, which helps you find mutual funds that are similar to your target fund. This can be very useful if you are trying to perform some tax loss harvesting to reduce your capital gains tax.
The tool will show you funds that are similar in their performance, allocation, and loads/expense ratio. It's a quick way to find replacement funds that you can use.
iPad / iPhone Apps
Morningstar has a free app that gives you the ability to sync up your portfolios from the website's interface, so you get access where ever you are. The app still lags the functionality of the website from it's great if you get an idea and want to do some quick research on it without having to navigate the website on your phone.
Personal Capital Tie-in
When you first sign up for the service, you'll have the option to have a one-on-one financial review with a licensed advisor through Personal Capital. This requires a minimum investment portfolio of $100,000. Along with a review, you'll also be provided with free Personal Capital tools to help you manage your investments.
If you're interested in this, you don't have to go through Morningstar because this is offered to every newly registered user to Personal Capital that has $100,000+ in linked assets.
Morningstar Premium Pricing Plans
How much does Morningstar Premium cost?
Morningstar Premium has a 14-day free trial that lets you to evaluate the service. If you choose to continue, the subscription fee is $29.95 per month or $199 per year. Paying the annual subscription means you save $160 off paying month to month.
If you want to commit to two years, it's $349.
If you can commit to three years, it's $449. If you subscribe through a link on this site, you can get $100 off.
Morningstar Premium Pros and Cons
- Morningstar is considered one of the most respected sources of information, analysis, and ratings on funds in individual securities. With Morningstar Premium, you'll have full access to that information.
- The fund screener tools will help you narrow down the very large field of funds to a digestible number of choices.
- The service will provide a breakdown of costs and fees associated with funds you plan to invest in, which allows you to see the full impact of what you'll be paying for owning those funds.
- Ratings are updated regularly, so you'll always have access to the latest information.
- The platform has numerous tools to help new or lightly experienced investors to improve their game.
- The service focuses primarily on mutual funds, and only to a lesser degree on ETFs and individual stocks.
- The monthly subscription fee of nearly $30 will be steep for small investors.
- There's a free version available (“Basic”), but it doesn't provide access to professional-grade analyst reports and ratings. That gives the service only minimal value.
Morningstar Trial and Promotional Offers
If you want to see the tool for yourself, Morningstar offers a 14-day free trial that gives you full access to the Premium product. It's a full-featured trial too – so you can put the tool through its paces.
Also, for a limited time, they're offering a big discount on the membership price – up to $100 off. The discount is based on the length of your membership. You can get $30 off a one-year membership, $70 off a two-hear membership, and $100 off a three-year membership.
On a single-year plan, this lowers the annual price from $199 down to $169 – or around $14 a month. It's at a price point where the real question is utility. If you can use Morningstar Premium, then it's very affordable. The best way to figure that out is to give it a try!
When I look to find Morningstar's competitors when it comes to tools for individual investors, it's hard to find a similar service.
At the institutional and professional investor sites, we have companies like Bloomberg, FactSet, and Thomson Reuters Eikon. Bloomberg Terminals are well known in the industry but they cost an estimated $24,000 a year – that's out of the price range of individual investors. FactSet and Thomson Reuters Eikon don't have brand recognition like Bloomberg but they offer similar institutional-level data with subscription fees in the five-figure per year range.
For individual investors, you won't get the depth of research available to Morningstar Basic subscribers but MarketWatch and Reuters are both sites that offer research for individual investors. They are newsier than Morningstar with a greater focus on general personal finance and investing content but it's the closest comparison.
In the area of tools, you can get similar portfolio management tools from other sites but you'll be missing the research piece. We do a comparison of the five best free investment portfolio tools available today.
Should You Sign Up with Morningstar Premium?
Morningstar Premium is designed primarily for self-directed investors. It doesn't do the investing for you, (that's a roboadvisor) but it will give you all the tools, research, and analysis you need to be a better investor.
It's also best suited for long-term investors, particularly those who prefer to invest through mutual funds. In that regard, the service offers one of the most comprehensive packages available in the industry. The screeners they provide will help you select the funds – and even the stocks – you want to invest in, as well as make suggestions for comparable securities. They also provide a breakdown of annual fees for both ETFs and mutual funds.
The X-Ray tool can be invaluable for self-directed investors because it's not feasible to dig into the holdings of every mutual fund to figure out an accurate mix of assets. If you hold both individual stocks and funds, you may find your portfolio has an excessive allocation in certain stocks. That's because the funds you hold may also include large positions in the same individual stocks you own elsewhere. Their tool can help you get that visibility without scouring the holdings report of each fund.
If you'd like more information, or you'd like to sign up for the trial, visit the Morningstar Premium website. Remember, if you use a link on our site, you can get $100 off.