Morningstar Votes for Mutual Funds
Jen Ryan from TheStreet.com has a great article up that takes on Morningstar's apparent bias against ETFs that quotes several people including one slow witted blogger.
Morningstar of course denies it is biased against ETFs, they say they are not conflicted and that they just call them like they see them.
I have been critical of Morningstar many times here and once or twice for RealMoney.com. But let's take them at their word for a moment; straight shooting un conflicted opinion. OK well then this is an admission that they have no ability or interest in forward looking analysis.
As the article points out their ratings are based on past performance. UC Riverside Professor Barry Misha commented that you can't blame an ETF if it does well or not.
Think about that, how many times was last year's worse performing sector or country or something else this year's best performer.
Also taking Morningstar at their word they make no effort to explore how a narrow ETF might fit in to a diversified portfolio.
Clearly you will not need the vast majority of ETFs that exist but that does not mean they don't merit unbiased study which Morningstar seems unwilling to do.
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5 comments:
Without necessarily disagreeing with the thrust of her argument, I would like to point out some weaknesses in Meg Ryan's post on the relative negativity of Morninsgstar toward ETF's versus conventional mutual funds. In the table purporting to show this tendency, she several times compares conventional funds (e.g., Fidelity Magellan) with index-based ETF's (e.g., Russell 1000). This is misleading. The former is an actively managed, heavy turnover fund with large growth and foreign stakes, whereas the latter is, of course, passive, blend and domestic. We should not expect analyses of these two very different vehicles to necessarily be the same (or even similar). I should also add that readers who desire comprehensive treatment of ETF's other than Morningstar might want to consider The Investors ETF Report, the Ocober issue of The American Association of Individual Investors Journal and etfconnect.com.
good stuf Steve, thank you.
Not sure though if calling her Meg was mistake or not, her name is Jen.
Kinda like the old saying -
- you never ask a barber if you need a haircut -
OG
hehe but I wonder if there is a better auto mechanic analogy in there somewhere.
I bought the morningstar site's information a couple of months ago just for the stock grading and analysis. At the time I was more interested in ETF's, oops. I have been pleasantly surprised by snatching up short term opportunities that get knocked down by whatever the crisis dejour is. When I see a stock zoom way below the buy point and fair value estimates, get the confirmation by the analyst (posted usually within 24 hours) that it's a fluke, it's kind of exciting for a not so smart greedy guy like me. Tom in Indy
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