Morningstar Review Of an Investment Research and Analysis Tool

Morningstar is one of the more well-known financial information and research sites out there. They’ve been in operation since 1984. Hence our Morningstar review. The site’s best known for its investment analysis and up-to-date news coverage of the stock market. But there’s more to Morningstar than just stock research! Morningstar actually operates an asset management arm that has a total AUM of nearly $250 billion. In fact, many people don’t even know that Morningstar is a publicly traded company. The ticker symbol is NASDAQ: $MORN. The company has a market cap of over $10 billion . In fact, they’re a component of the Russell 1000 index too!

Who is Morningstar for?

Anyone can use Morningstar for its trusted market research and news. Hence our Morningstar review. But if you really want to use the site as a source for researching investments, make sure you can rely on the fundamentals of the stocks. Morningstar can provide all of the fundamental information for stocks and funds including balance sheets, financial information, and past performance. But don’t expect to see any technical analysis or charting on Morningstar. 

The Morningstar rating system is well known throughout the investing world. It’s utilized by institutions around the world as a measuring stick for stock valuation. What does the rating system use? Morningstar ratings are handed out to stocks based on how they have performed in the past.

It’s a backward-looking historical view, so if you are more of a forward-looking investor, then the Morningstar rating system is probably not for you! Remember to always do your own research on any company you’re investing in. You want the best setups even the investing. The better the entry, the better the return in the longrun.

How Much Does Morningstar Cost?

Morningstar is reasonably priced compared to some investment analysis sites out there. Especially if you sign up for a multi-year membership. The standard price for a one-year annual membership is $199. Like with most subscription services, it gets cheaper if you sign up for a longer term. They’re more expensive when you sign up on a monthly basis. Here’s a breakdown of the different pricing tiers for Morningstar Premium:

Price PlanCostAnnual Cost 
Monthly $29.95$359.40
Annual$199.00$199.00
Two-Year rate$349$174.50
Three-Year rate$449$149.67

What Does Morningstar Premium Include?

With Morningstar Premium, you get full access to all of the features on the site. These include some of the best stock and fund research tools on the market! Morningstar puts an emphasis on fundamental stock analysis. This means you’ll most likely be poring over data and numbers, rather than scanning stock charts. Here’s a quick Morningstar review of all of the features you get access to when you sign up for a Premium account:

Analyst Reports: Always a popular premium feature to offer, you get full access to what Morningstar analysts think about every stock or fund. Unlike the Morningstar rating system, these analyst reports are forward-looking. Although they do take into account the Morningstar rating as a major part of their analysis. These analyst reports provide a full and in-depth analysis of the company and include coverage of things like:

  • The business strategy
  • The outlook for the company
  • The economic moat of the company 
  • Fair value
  • Profit drivers
  • Risk and uncertainty
  • Stewardship

The analyst report gives you a snapshot of the company and stock. It’s definitely useful if you’re reading about a stock for the first time. Rather than reading hundreds of pages of company filings, all you need to do is check out the Morningstar analyst report. You’ll get a great idea of where the company is headed.

Morningstar Review

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Best Investments/Fund Analysis: This feature is exactly what it sounds like: using Morningstar analyst recommendations, this page lays out the top fund and stock picks according to Morningstar rating and analyst recommendations.

Fund analysis comes with the ability to track your actual portfolio within the Morningstar platform. If you’re a Morningstar premium member, the platform will analyze your portfolio and provide helpful suggestions to balance and diversify your holdings. Use the Morningstar rating that’s attached to the equity or fund you wish to trade, and receive a fund analysis when you track your portfolio through the site. 

Stock/Fund Screeners: This is a bonus as it does save you some money from subscribing to a stock screener as well. Stocks screeners are helpful if you don’t feel like scrolling through thousands of stocks and funds. You can input your search parameters and instantly pull up a list that matches your search criteria. You should think twice about subscribing to Morningstar for the stock screener access. Most large brokerages and financial sites offer their own stock screeners, sometimes for free!

Portfolio X-Ray: One of the best features of the Morningstar Premium service is the in-depth portfolio analysis tool called the Portfolio X-ray. This allows investors to have their funds analyzed using Morningstar’s rating system. It even provides suggestions for different funds that include stocks that may optimize their portfolio. Scrolling through all of the hundreds of holdings for a particular fund can be tiresome. As a result, Morningstar’s Portfolio X-ray can help you sift through the thousands of different funds to find ones that match your style of investing.

How Accurate is the Morningstar Rating System?

It’s a fair question, considering it’s the bread and butter of the Morningstar financial site and used by countless institutions around the world. But should you base your investments on a simple star system? After all, even stocks like Apple only receive a three-star fair value rating on the site.

But countless brokerages, banks, and even the FINRA mutual fund analyzer use Morningstar ratings, so how can it not be a reliable measuring stick? Keep reading our Morningstar review to find out.

The truth is, like with any rating system, there’s a catch. As we already mentioned, Morningstar’s rating system is based on past performance compared to similar assets. While this is a fine historic indicator of how the stock has performed, it’s in no way a forward-looking outlook. Remember one of the first rules of investing. Past performance is not indicative of future results. 

Morningstar applies a rating based on a peer-adjusted basis. Meaning how it compares to the performance of other funds. It’s also an average-weighted rating. This means that historical outliers are not really taken into account, just the median performance throughout the given time period. Every single metric in the Morningstar rating system is risk-adjusted. But of course, as the market ebbs and flows funds can gain or lose stars from their ratings. 

Even Morningstar advises investors to not use the rating system as a definitive reason to buy or sell an asset. Rather, use it as a guideline to analyze past performance. As always, do your own research and due diligence before buying or selling. Even if you’re paying for a subscription research service. 

Morningstar Review of Pros and Cons

Pros

  • In depth stock and fund analysis with an easy to use and intuitive interface
  • A free 14-day trial allows you to try Morningstar out before paying for a subscription
  • Well designed mobile app allows you to research on the go
  • News and analysis is trusted by institutions around the world
  • Morningstar rating system is widely considered an industry benchmark
  • Easy to use features like stock screeners and Portfolio X-ray

Cons

  • Rating system only looks at past performance 
  • Many of the premium features can be found for free on other sites
  • Only for fundamental analysis, no charts or technical analysis available
  • Morningstar has an emphasis on funds over stocks which may not suit everyone

Final Verdict on Morningstar Review

When you balance all of the pros and cons, a Morningstar review of their Premium account far outweighs the bad. Overall, $199 for an annual subscription to information and analysis that’s used by institutions and individual investors around the world is a small price to pay.

You really do get everything you need to be a successful long-term investor. But I would say that a Morningstar Premium subscription definitely benefits investors rather than traders. A lot of this is because Morningstar focuses on mutual funds rather than individual stocks.

If you’re okay putting your money into funds and leaving it there in a low-stress, low-touch investment style, then Morningstar is perfect for your needs. If you’re a trader that likes to read charts and trade options, you probably won’t get the same experience out of Morningstar’s services. Other than a passive investor. At the end of the day, the Morningstar Premium subscription will help you to be a more profitable investor. In the end that’s all that really matters. 

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