Morningstar for Mutual Fund Research

June 6, 2009

Morningstar Mutual Fund Research

Morningstar is a good place for mutual fund research that offers investors more information than simply fund performance. Morningstar is known for its unbiased reporting and analysis and it has a tremendous amount of free information available. It does have a premium service that offers fund analyst reports and portfolio analysis tools but everything we’ll talk about today is available for free.

Mutual Fund Research

Important questions to ask about a mutual fund you’re researching are:

  • What is the objective of the fund?
  • What does the fund invest in?
  • What is the Morningstar rating?
  • How old is the fund?
  • How long has the portfolio manager run the fund?
  • What are the expenses of the fund?

To research a mutual fund on Morningstar simply type in the name or ticker symbol of the fund in the Quotes box on the Morningstar site and you’ll be taken to the fund snapshot page. Almost all of the questions listed above can be answered on the fund snapshot page, the rest are just one click away by drilling down from the snapshot page for more detail.

Fund Objective – Mutual funds are listed by their investment style and are also categorized by their investment objective. If, after answering the above questions, an investor has found that they are an aggressive investor, they do not want to invest in a mutual fund that focuses on short term government bonds.

Investment Category – Mutual funds are categorized by the investments they use and where these investments are located. U.S. corporate short-term fixed income funds are different than Pacific Rim technology funds. Many of the most popular funds fall into the category of US Large Cap, which means the fund invests in American companies with large capitalization. These companies are the household names you hear every day.

Morningstar Rating – Morningstar uses a five star rating system where they compare each fund to its peers. They compare apples to apples and not oranges. This helps the individual investor compare funds that are the same category and objective.

Life of Fund/Portfolio Manager Tenure – Past history is all that is available to compare investments. An investor will want to make sure there is a legitimate track record and that the same portfolio manager has run the fund over that period. A five year timeframe is usually a long enough length of time to make any judgments.

Expense Ratio – The more expensive it is to run the fund, the higher the expense ratio. The higher the expense ratio, the more it affects the performance of the fund. A fund that has 3.00% in expenses will have its performance diminished compared to one with lower expenses.

Hopefully answering all of these questions will have helped you narrow your list of mutual funds down to a small handful and now you can look at fund performance to help make your decision. That decision however, is never final. It’s really importance to keep track of the investments and any changes to them. If you don’t have the time or resources to do that, you may want to think about hiring someone to do it for you.

Trying to absorb and process all the information may be a little overwhelming but don’t get discouraged, remember this research is helping you financially prepare for your future. Researching the potential mutual funds is a vital step in investing your money; hopefully this overview will help you feel a little more prepared for the process.

To learn more about the research options available via Morningstar – Click Here.


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