If you’ve been investing for any 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 Investor, 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 is, “Is a Morningstar subscription worth it?” We’re here to say yes because of the top-notch research tools, full fund screener tool, detailed fund costs/fees analysis, regularly updated ratings, and much more. Read the rest of this article to find out what makes it worth the subscription.
Table of Contents
- What Is Morningstar?
- How Morningstar Investor Works
- Morningstar Investor Tools and Features
- Analyst Reports
- Best Investments and Fund Analysis
- Portfolio Manager
- Portfolio X-Ray
- Article Archive
- Similar Funds
- iPad / iPhone Apps
- Personal Capital Tie-in
- Morningstar Investor Pricing Plans
- Morningstar Premium Pros and Cons
- Morningstar Trial and Promotional Offers
- Morningstar Competitors
- Is a Morningstar Subscription 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, other information, and tools to help investors make more informed investment decisions.
As an asset management company, it has more than $220 billion in assets under management.
What does the Morningstar star rating indicate? According to Morningstar, it measures a fund’s risk-adjusted return relative to similar funds. Funds are rated from 1 to 5 stars, with the best performers receiving five stars and the worst performers receiving a single star.
How Morningstar Investor 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 Investor 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. It is the successor to Morningstar Premium and was rolled out on June 15. It combines Morningstar’s data, content, and research with redesigned tools. The combination will enable investors to holistically manage their investments, discover and evaluate investment ideas and track the markets.
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.
The free service is fairly limited, but it’s enough to give you a feel for the service. If you want analyst reports and top investment picks, Morningstar Investor costs $199 per year. There is a discount on the Morningstar Investor subscription price if you subscribe for multiple years. Your subscription starts with a seven-day free trial to give you a chance to evaluate the service.
What do you get with Morningstar Investor?
Morningstar Investor 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 “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 and 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), recaps the latest quarterly financial report and integrates 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, 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 Investor, 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 peers. 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 as 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 asset allocation and 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 let 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 your chosen investment criteria. (BEING “RETIRED”)
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 Investor offers various planning tools. It includes tax planning, personal finance, saving for college and retirement, and 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 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 similar funds 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 allows you to sync up your portfolios from the website’s interface, so you get access where ever you are. The app still lags the website’s functionality, but 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 with $100,000+ in linked assets.
Morningstar Investor Pricing Plans
How much does Morningstar Investor cost?
Morningstar Investor has a 7-day free trial that lets you to evaluate the service and then it’s $249 a year.
We have a promotion code – WALLETHACKS – that gets you $50 off the one year subscription. Just make sure you put WALLETHACKS into the promotion code field to get that discount and trial period.
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 Investor, you’ll have full access to that information.
- The fund screener tools will help you narrow down the 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. Furthermore, most basic plan features are being “retired” during 2022.
Morningstar Trial and Promotional Offers
If you want to see the tool for yourself, Morningstar offers a 7-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.
When I look to find the individual investor tools from Morningstar’s competitors, it’s hard to find a similar service.
If you want stock advice, picks, and analysis – Motley Fool Stock Advisor is probably your best alternative. It’s normally $199 a year, but they’re discounting it to $79 yearly with a 30-day 100% membership refund period.
*Billed annually. Introductory price for the first year for new members only. First year bills at $79 and renews at $199.
They have a vast library of stock recommendations and analysis with new stock picks each month. The picks are just a part of the membership, they also have an extensive collection of advice columns that focus on various topics like starting in investing, best buys, market news, etc. The refund period means that you sign up and if you are not satisfied during the first 30 days, you get a full refund.
We also have a comprehensive review of the Motley Fool Stock Advisor service that goes into more detail.
(Stock Advisor is just one of their premium services, you can see the whole list of Motley Fool Premium Services here)
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 compare the five best free investment portfolio tools available today.
Is a Morningstar Subscription Worth It?
Morningstar Investor is designed primarily for self-directed investors. It doesn’t do the investing for you (that’s a robo-advisor), 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 your funds 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 to sign up for the trial, visit the Morningstar Investor website. Remember, if you use a link on our site, you can get $100 off.