Methodology Documents

Morningstar has conducted research on active and passive investment strategies and their associated vehicles since 1986.

This paper outlines the key assumptions and details behind our quantitative equity rating methodology.

We believe that a company's intrinsic worth results from the future cash flows it can generate. The Morningstar Rating for stocks identifies stocks trading at a discount or premium to their intrinsic worth--or fair value estimate, in Morningstar terminology.

This document describes the rationale for, and the formulas and procedures used in, calculating the Morningstar Rating for funds (commonly called the “star rating”). This methodology applies to funds receiving a star rating from Morningstar.

This paper outlines the key assumptions and details behind our quantitative equity rating methodology.

Morningstar developed the Morningstar Equity Comparables system to give investors and financial professionals an objective benchmark for comparing companies. Morningstar Equity Comparables is genuinely different to other industry classification schemes. We start from the bottom up with comparable companies, as opposed to the top down with sector definitions. For every pair of companies, we determine how similar they are–anywhere from closely comparable to distantly related based on automated analysis of the companies' own business description. We automatically analyse the text of the business description and work out whether companies are talking about similar things as they describe their businesses. Businesses described in similar terms are comparable.

Morningstar Category classifications sorts portfolios into peer groups based on their holdings. The categories help investors identify the top performing funds, assess potential risk, and build well-diversified portfolios. Here is how those categories ar

Morningstar Category classifications sorts portfolios into peer groups based on their holdings. The categories help investors identify the top performing funds, assess potential risk, and build well-diversified portfolios. Here is how those categories ar

This paper examines the relationship between asset managers' stewardship attributes and investor outcomes, and finds that better stewards of capital generally deliver better overall fund performance.

This paper discusses Morningstar's view of the 699 ETF managed strategies it tracks, giving investors and advisors insight into industry performance at Q42013.

Financial assets such as stocks and bonds ar only one component of an investor's total economic worth. Other assets, such as human capital, real estate, and pensions often represent a significant portion of an investor's total wealth. These assets, howev

Here we explore our quantitative equity and credit ratings, which are empirically driven and based on the proprietary ratings our analysts are already assigning to stocks.

ETF managed portfolios are investment strategies that typically have more than 50% of portfolio assets invested in ETFs. Primarily available as separate accounts, they represent one of the fastest-growing segments of the managed account universe.

When consumption and funding levels are combined and correct modeled, the true cost of retirement is highly personalized based on each household's unique facts and circumstances, and is likely to be lower than amounts determined using traditional models.

This paper offers historical evidence to support the notion that a higher allocation to equities is optimal for investors with longer time horizons and that the time diversification effect is relatively consistent across countries, persisting for differe

Morningstar Global Category Classifications

Occasionally, a fund will move from one Morningstar category to another because of a significant change in its investment process that abruptly leads to a substantially different portfolio. In such cases, the fund’s star rating is treated differently tha

The purpose of this study is to provide a comprehensive comparative analysis of the costs of investing in ETPs and index funds across different asset classes and sub-asset classes.

ETF managed portfolios are investment strategies that typically have more than 50% of portfolio assets invested in ETFs. Primarily available as separate accounts, they represent one of the fastest-growing segments of the managed account universe.

Here, we present a concept that we call “Gamma,” designed to quantify the additional value that can be achieved by an individual investor from making more intelligent financial planning decisions. Gamma will vary for different types of investors and for