Morningstar Take
Our fund analysts closely monitor each of their funds, updating Morningstar's Take whenever conditions warrant. They do all of their own research: calling mutual-fund companies, talking to fund managers, and digging through annual reports.
Because we are not involved in money management or underwriting, we have no conflicts of interests when it comes to providing you with analyses. When do analyses get updated? Whenever the Morningstar analyst thinks there’s been important news or events that you should know about.
Returns
Fund Family Grade
Our fund family grades were designed to give investors a glimpse at the organization behind the fund. This will help investors assess the quality of research the firm does and whether a manager change is likely to result in a performance drop.
We rate fund companies in four broad asset classes: domestic stock, foreign stock, municipal bond, and taxable bond. To determine a grade for a fund family within a given asset class, we first score each fund on three measures: returns, volatility, and expenses, all relative to the fund's category peers. Returns account for 55% of a fund's score, volatility accounts for 25%, and cost accounts for the final 20%. The individual-fund scores are then combined; the biggest funds in the family are weighted more heavily in the grade calculation. We then give the firm a score for consistency. We reward firms with a greater number of successful funds. We do this to give a sense of how a firm has done for its average shareholder. The grades are built on a curve, just as we do with our star rating, so that the number of Fs and the number of As are equal.
A poor grade doesn't mean every fund in a fund family's lineup is a dud. Some may have lower costs and/or better managers. However, should managers leave a firm that hasn't consistently generated solid results across its funds, shareholders may want to head for the exits.
Role in Portfolio
A guide to assist with portfolio allocation, funds can be designated core, supporting player or specialty. Core funds should be the bulk of an investor's portfolio, while supporting players contribute to a portfolio, but are secondary to the core. Specialty offerings tend to be speculative, and should typically only be a small portion of investors' portfolios.
Kudos
Our analysts highlight some of a fund's strong points.
Risks
Our analysts highlight, in 1-5 bullet points, some potential pitfalls for a fund. Role in Portfolio
A guide to assist with portfolio allocation, funds can be designated core, supporting player or specialty. Core funds should be the bulk of an investor's portfolio, while supporting players contribute to a portfolio, but are secondary to the core. Specialty offerings tend to be speculative, and should typically only be a small portion of investors' portfolios.
Strategy
Our analysts spell out the basics of fund managers' strategies, such as what kinds of companies they look for, what market cap range they invest in, and how much will they pay.
Management
A brief guide to the manager's experience and the depth of analysts behind them.
Inside Scoop
A brief description of the fund written by Morningstar analysts.
Note about Morningstar's Policy on Employee Share Ownership:
To avoid potential conflicts of interest, Morningstar has set policies governing employees' personal investments.
Mutual Funds: No Morningstar restrictions apply to conventional open-end mutual funds. Because these funds aren't sold on an exchange, trading by those with access to special information can't affect the funds’ prices.
Mutual-Fund Companies: Morningstar staff cannot buy the stock of any publicly traded company that manages mutual funds as a significant part of their business. Examples include John Nuveen and T. Rowe Price. Analysts can buy funds sponsored or advised by these firms, but cannot buy stock in the firms themselves.