10 Things You Might've Missed on Morningstar.com in 2019
Here are just some of the ratings, research, trends, and topics we covered this year.
As the end of the year approaches, you can count on a few things. Those with use-it-or-lose-it flexible spending accounts will be stocking up on bandages, contact-lens-cleaning solution, and sunscreen. Parents with school-age children will be planning how to fill the two-week break. And publishers and media outlets will be subjecting us to a barrage of year-end top 10 lists.
This year, Morningstar will contribute to the barrage. Over the coming week, some of our columnists and researchers--including Russ Kinnel, Ben Johnson, Christine Benz, and Jon Hale--will share their top 10 lists for the year. We'll also share the most popular content for the year, as well as funds, exchange-traded funds, and stocks.
We kick things off with today’s list: 10 things you might’ve missed on Morningstar.com this year. While we’d like to think you’re visiting us daily, we know life can get in the way of that goal. So here are some noteworthy ratings, reports, research, and trends for the year.
New Ratings and Methodology Changes
2019 was a busy year for methodology sticklers.
In April, we made some changes to our Morningstar Categories--most notably, retiring the once-giant intermediate-term bond category and introducing two new categories: intermediate core bond and intermediate core-plus bond. Both types of funds invest primarily in U.S. investment-grade bonds, but those of the “plus” ilk have more freedom: They can invest a greater portion of assets in junk bonds and nondollar debt. Those who revel in detail can learn more about the changes here.
We also revamped the methodology behind our Morningstar Analyst Ratings--that qualitative, forward-looking rating that can help you find mutual funds and ETFs best positioned to outperform over a full market cycle. The rating still follows a Gold, Silver, Bronze, Neutral, and Negative scale. But we’ve collapsed the number of pillars on which we evaluate funds from five to three--People, Process, and Parent. We’ve also put more weight on fees, tailoring ratings by share class. We’ll continue to roll out the enhanced approach over the coming year; you can find more details here.
We’ve made some changes to the Morningstar Sustainability Rating, too. The rating continues to use company environmental, social, and governance assessments from Sustainalytics and rate funds on a 5-globe scale. However, the new Sustainability Rating scores the overall ESG risk in a fund portfolio--the degree to which the holdings of a particular fund may face risks from ESG issues--regardless of industry. We think this will be more useful for users who seek to understand and manage the ESG implications of their investments. Dig into the change here.
And as in years past, we’ve updated our annual ratings for 529 plans; four plans earn our top rating of Gold. We've also updated our annual HSA rankings; interestingly, this year’s best HSA for saving is the best HSA for investing, too.
The Long View Podcast
Morningstar director of personal finance Christine Benz and global head of manager research Jeff Ptak joined forces this year on a new weekly podcast, The Long View. The duo has interviewed financial pioneers (Bill Bernstein, Sheryl Garrett), advice gurus (Michael Kitces, Harold Evensky), respected financial writers (Jonathan Clements, Mark Miller), retirement specialists (David Blanchett, Maria Bruno and Joel Dickson), and investment managers (Bill Nygren, Dan Ivascyn), to name just a few. Peruse The Long View podcast page to see all of the insightful conversations Christine and Jeff have had so far, and be sure to subscribe so you don’t miss an episode. The podcast is available in Apple Podcasts, Google Podcasts, Spotify, and Stitcher. (And while you’re at it, subscribe to our weekly Investing Insights podcast, too!)
Christine’s Latest Batches of New Portfolios
Evidently launching a new weekly podcast wasn’t enough “new” for Christine in 2019. She also launched two new series of portfolios this year.
The first collection focuses on portfolios for minimalists. The retirement bucket portfolios for minimalists, the tax-efficient retirement bucket portfolios for minimalists, the retirement saver portfolios for minimalists, and the tax-efficient retirement saver portfolios for minimalists all share a common thread: taking a streamlined approach to the investments you choose so that you can focus on the big picture, such as your asset mix, savings rate, and progress against your goals.
“With fewer accounts and holdings, you can better focus on the really big determinants of your financial success: your asset allocation, your savings or spending rate, and your proximity to reaching your goals,” Christine says. “You won't risk getting bogged down in small-bore jobs like assessing your portfolio's value/growth exposure or paying attention to earnings reports related to stocks that you own.”
The second new collection of portfolios--launched just this week--is ESG-focused. Christine’s ESG portfolio series includes portfolios focused on mutual funds for retirees, ETFs for retirees, mutual funds for savers, and ETFs for savers. The time is certainly right for these new entrants: ESG-related funds are on track to have their best year in terms of asset growth.
Morningstar.com welcomed several columnists to the fold in 2019.
Sarah Newcomb is a behavioral economist with Morningstar. In her column, Sarah focuses on what she calls smart shortcuts: those rules of thumb that get us where we need to go without bogging us down in too many details. But some shortcuts aren’t smart; instead, they’re mental booby traps. Armed with that Ph.D. in behavioral economics--and an accessible, conversational writing style--Sarah has outlined a simple plan for financial independence and explains why the market isn’t “due” for a downturn. Her work is available on her author page.
Two portfolio specialists joined the columnist ranks this past year. Josh Charlson is a director with Morningstar Research Services, LLC, a wholly owned subsidiary of Morningstar. “With many years under my belt working in Morningstar's manager research group and on our workplace retirement products, I intend to raise dilemmas and distill concepts that we wrestle with on a daily basis, in ways that I hope will be beneficial to a wide range of investors and readers," Josh explains. So far, Josh has tackled the question of how many funds you really need, pitfalls to avoid when putting together a portfolio, and when to sell a fund. Tap into Josh’s insights.
Amy Arnott is a portfolio strategist at Morningstar who began writing a portfolio-focused column for us in November. Amy has revisited the case for international investing and examined the industry’s inability to crack the retirement-income code. Bookmark Amy’s archive.
Morningstar.com Special Reports
As in years past, we developed a series of special reports this year, covering retirement, college savings, and bonds and ETFs, among other topics. Here’s a sampling (and be sure to watch for our 2020 Portfolio Tuneup in late January 2020).
Morningstar’s 2019 Portfolio Tuneup
We’ll coach you on the steps to take to ensure that your portfolio is in fighting shape for the years ahead.
2019 Morningstar Investment Conference
Follow our annual investment conference with Morningstar.com's reports and one-on-one interviews with some of the industry's best investing minds.
Weekend Money Projects With Christine Benz
Use this summer series to cross some financial tasks off your list before fall.
Morningstar’s Guide to 401(k)s
We share our strategies for making the most of your company's retirement plan.
Morningstar’s Guide to Fixed-Income Investing
Tips, strategies, and picks for better bond investing.
Morningstar’s Guide to College Savings
What you need to know about college savings options, from 529 plans to Roth IRAs.
Morningstar’s Guide to ETFs
Here’s what you need to know about these popular funds that trade like stocks.
Portfolio Makeover Week
Christine Benz helps investors check their progress, assess allocations, target holes and overlap, and upgrade their holdings.
Morningstar’s Guide to Charitable Giving
'Tis the season for giving. Here are some smart charitable-giving strategies.
Updates to Morningstar Research Classics
Just like that favorite restaurant you keep going back to, Morningstar frequently revisits and updates some of its most-embraced research.
We kicked off the year with an update to our annual Buy the Unloved strategy, our contrarian tactical approach that suggests buying funds from categories that are in outflows at the fringes of your portfolio.
And director of global exchange-traded fund research Ben Johnson reported on Morningstar’s latest Active/Passive Barometer, which measures the performance of active fund managers against their passive peers.
Commentary on Investing Trends
No single investing trend grabbed all the headlines this year. The ongoing dominance of U.S. growth stocks is of course notable, as is the continued migration away from actively managed funds to passive choices.
One investing trend that we covered in depth during the year: the interest in and potential opportunity with cannabis stocks. We expect the cannabis industry to grow by 9 times through 2030 amid widening legalization and increased participation for the U.S., Canadian, and international markets, says director Kris Inton.
“For the United States, recreational cannabis and medicinal cannabis have penetrated just 8% and 21% of their estimated markets, leading to our expectation for 25% and 15% compound annual growth rates through 2030, respectively,” he adds.
Our work on the topic included:
We see some values, although we don’t think any of the companies have moats.
2 Top Picks in the Cannabis Industry
With cannabis' popularity already growing, widening legalization will further catalyze demand.
Canopy Has Global Potential Amid Foggy U.S. Market
The cannabis company took a hit on second-quarter earnings, but consumer demand is expected to increase.
Cannabis Faces Significant ESG Risks
Industry would be wise to adopt sustainable practices from the beginning.
Another investing topic we cornered: the growing interest in environmental, social and governance issues. Morningstar’s head of sustainability research Jon Hale addressed the topic from a variety of angles, including gauging the popularity of funds focused on ESG strategies, discussing intriguing new funds, addressing myths, and revealing how funds cast their proxy votes on key ESG issues. Access Jon’s archive here.
Moreover, our equity analysts have begun to examine their industries through the lens of ESG issues. For instance, they’ve examined which utilities stand to benefit from the “greening” of the U.S. and will be producing more research along these lines in 2020. Stay tuned!
Guidance During Market Volatility
Barring catastrophe during the last few weeks of the year, 2019 will go down as a banner year for U.S. stocks: As of this writing, the S&P 500 is up more than 27% for the year.
That said, the market wasn't on a straight upward march all year; volatility was ever-present. Christine Benz addressed that volatility over the course of the year--and offered some ideas for what to do in its wake. Bookmark her insights--they're great sanity checks when volatility comes around.
Simple, Effective Ways to De-Risk a Portfolio
What is it, who should do it, and why?
Retirees: Avoid These Traps in Turbulent Markets
Recent volatility provides a good reason for retirees to check up on their portfolios--but don't overdo it.
A Down-Market Survival Guide for Your 20s, 30s, and 40s
When you have many years until retirement, market volatility should be easy to shrug off, but it isn't always. A step-by-step guide to taking control.
A Down-Market Survival Guide for Pre-Retirees
If you're within 10 years of retirement, this eight-step review can help you improve your situation--and your peace of mind.
A Down-Market Survival Guide for Retirees
These six steps can help you take back control in uncertain times.
When Market Volatility Meets Your Retirement Portfolio
How to make sure your portfolio and plan can ride out the storm.
Our Take on Top Stories in Our Industry
Two stories took center stage in the financial-services industry in 2019: the passing of Regulation Best Interest and the ongoing fee wars.
Director of policy research Aron Szapiro addressed the long-awaited regulation in "What Should We Make of Regulation Best Interest?" Our take: The SEC has taken some important steps to provide better investor protections--though it hasn’t gone far enough for some.
“Investors still cannot assume that the advice they get is conflict-free," concludes Szapiro. “But they will have protection from the most indefensible conflicts of interest and disclosures to help them understand how their advisor makes money. It’s not a radical shift, but it’s a real change.”
On the fee front, asset managers of some of the largest index funds and ETFs reduced their expense ratios early in the year, while financial-services upstart SoFi filed for the first zero-fee ETF. Later in the year, the largest online brokerages reduced their online trading fees to zero. No-commission trades are of course good news for investors--but "free is never free,” reminds Ben Johnson.
“As more and more of the real cost of doing business with these platforms begins to seep into different dark corners, it's important that these firms be transparent about how they're monetizing your business, how they're taking your assets and turning that into revenue for their organization," he argues.
Jack Bogle’s Death
This top-10 list wouldn’t be complete without a mention of Vanguard founder Jack Bogle death in January 2019. Inventor of the first retail index fund, advocate for investors, and relentless promoter of simple and low-cost investing, Bogle changed the fund industry. As Morningstar’s Dan Culloton and Alec Lucas noted in their commentary shortly after Bogle’s death, “There was nothing passive about the father of passive investing.”
Remembrances poured out after Bogle’s passing, including those from Morningstar’s Russ Kinnel, John Rekenthaler, and Jeff Ptak--as well as other Morningstar researchers included in this video. We also assembled more than a decade’s worth of video interviews that we’ve done with Jack.
Jack is certainly missed; the investing world is a better place because of him.