MorningStar is an investment research company. It’s considered one of the most influential investment research companies in the world. MorningStar prides itself of giving its investors great advice. They grew from a startup to a globally recognized investment research firm in 35 years. Joe Mansueto started the company because he thought it was unfair that the average person didn’t have access to all the information that financial professionals did. He wanted to make investment research available to everyone.
Today, MorningStar has over 5,000 employees in 27 countries and manages more than $220 billion dollars in assets.
- What does MorningStar Offer?
- The Differences Between MorningStar Basic and Premium
- MorningStar Premium Features: Are They Worth It?
- Who is MorningStar For?
- MorningStar’s Customer Service
- Pros and Cons of MorningStar
What does MorningStar Offer?
MorningStar is famous for providing reviews of investments. They started with mutual funds, including index mutual funds, expanded to cover ETFs, and have branched out to include stocks as well. They rate everything from one to five stars. A five-star rating is for the best performing stocks and funds, and a one-star rating indicates poor performance.
The Differences Between MorningStar Basic and MorningStar Premium
The basic service is free, but you can get more in-depth research and more features with a premium subscription. The basic service gets you access to the article archives, and limited access to Portfolio management, Screeners, and Portfolio X-ray. We’ll get to those in a minute.
The premium service is $199 a year, or $29.95 a month. This gets you:
- Analyst reports
- Top investment picks
- Portfolio manager
- Portfolio X-ray
- Article Archive
It does come with a free two-week trial, so you can give it a try and see if it works for you.
What do these features do for you? Let’s take a look.
MorningStar Premium Features: Are They Worth It?
The below features are only available to MorningStar Premium members. We are analyzing each feature in-depth below to provide you with a sneak peak of these features for your assessment. In our opinion, these features are really worth of $199 premium membership fees a year.
MorningStar Analyst Reports:
These provide a detailed summary of what MorningStar experts think of an investment and whether it’s a worthwhile to add to your portfolio. The analyst reports cover both stocks and funds.
For stocks, it reports on the company’s latest quarter earnings, how much debt they have, and how they might perform in the future. They also report on if a company is over-valued or under-valued. This is available only to premium subscribers.
Here’s MorningStar’s analyst report for Facebook stock.
The summary of analyst report provides lots of great insights of the company: its strategy, strengths, weaknesses, especially how the company is competing in its respective markets against their competition, and the forward-looking of the company. I personally love the “fair value” feature of the analyst report. MorningStar’s analyst provides a fair value for the company’s share based on their intensive research. This is the share price the analyst believes to be fair given the company’s performance and its prospects. For example, in the case of Facebook on August 2, 2020, the analyst believes that its fair value’s share price is at $265. On that date, facebook shares are traded at $268.44, which is a bit more expensive than what the analyst believes to be fair. Many investors can use this feature to validate if they should buy a particular stock.
In addition to stocks, analyst reports also cover funds. Given Morningstar’s intensive experience and knowledge in the fund space, their analyst reports about funds are also more intensive.
MorningStar offers two fund ratings for funds: star rating (one to five stars) and gold/silver/bronze rating. If star rating provides insights how a particular fund has performed up to today based on its returns, gold/silver/bronze ratings provide insights how the analyst believes the fund to perform in the future.
Here is an analyst’s report for an ETF – Vanguard Total World Stock ETF. As of Aug 2, 2020, Morningstar analyst believes that this fund has performed relatively well (three stars) in the past, but will perform very well in the future (gold).
MorningStar analyst reports of fund are focused on three dimensions of the fund: process; people; and parent. They also provides a summary and I often find these summary to be valuable. It is simple, concise, and often offers lots of insights why they believe such a fund to be perform well or not so well in the future.
And here is the analyst’s summary of Vanguard Total World Stock ETF
MorningStar’s Top Investment Picks:
If the thought of picking your own investments make you shudder with fear, MorningStar’s Investment Picks might be for you. They compile five-star rated stocks, gold or silver mutual funds, EFTs, all categories of bonds, index funds, target funds, starter funds and anything else they think is worth a look.
This is another great feature for investors, especially if you want to manage your own investment, but do not have time nor expertise to pick stocks or funds for your portfolio.
Of course, upon choosing a stock or fund, you can and should read the analyst report for such stock or fund to understand it better before making the final decision to invest in it.
MorningStar’s Portfolio Manager:
Portfolio Manager lets you keep track of all your investments, analyze your portfolio (premium), and evaluate your strategy (premium). You can create a list of funds and stocks you’re thinking of investing in and have all the information on those funds in one place.
MorningStar’s Portfolio X-Ray:
This tells you where your money is, for example, Tech, real estate, energy, consumer services. It also tells you which funds are high-yield, aggressive growth, slow growth, or cyclical. It’s valuable to help you diversify your portfolio and make sure you don’t have too many investments in any one category. It tells you how well your investments are meeting your goals.
Here, you can evaluate funds by category, by rating, by performance, or by risk. You can see things like:
- Annual returns
- Trailing returns
- Load-adjusted returns
- Tax-cost ratio
You can also see if you have similar funds or find funds similar to the ones you already own.
MorningStar’s Cost Analyzer:
This is part of the premium subscription, but there are free versions you can find online. You can compare mutual funds and it will tell you how much they cost based on starting and recurring investments.
Who is MorningStar For?
If you’re fascinated by investments and can’t get enough information, MorningStar puts everything you need to know in one place at a reasonable cost. It doesn’t invest for you, but it makes it easy for you to find out everything you need to know so you can decide whether an investment is worth it to you or not. If you’re a self-directed investor, then it’s probably worth the cost.
On the other hand, some financial brokerage firms have similar research options, or will pay the fee for MorningStar if you have enough money invested (which varies, depending on the company).
MorningStar’s Customer Service
MorningStar earns an A+ rating from the BBB, although they aren’t accredited. There are four one-star reviews and eight complaints in the last three years. The reviews complain about how difficult it is to cancel a premium subscription, although MorningStar says they have updated this process so that it’s easier.
MorningStar gets a 2.2 score on TrustPilot. Customers complain of frustrating websites, the customer support and the difficulty of canceling.
Pros of MorningStar:
- Analysis of stocks, funds, bonds and EFT’s
- Lots of high-quality information can be found in one place
- Premium subscription offers tools to help evaluate your portfolio and if it’s meeting your financial goals
- Screener page is customizable
- Free trial
- Premium articles
Cons of MorningStar:
- MorningStar was the first of its kind, but now there are competitors that do the same thing. Bloomberg, Thomson Reuters, and Marketwatch are just a few.
- Free service is somewhat limited
- MorningStar hasn’t changed much in the last 10 years, whereas competitors are more up to date
- Can’t export to Excel spreadsheets
MorningStar is a fairly low-cost option for beginning investors, or even more sophisticated investors. They provide a wealth of research and data analysis. There are now some other companies that do the same thing, so you will have to evaluate which company is best for you.