Topnotch Portfolio Diversifiers
Our Premium Fund Screener picks valuable supporting players.
Near the conclusion of each Fund Analyst Report on Morningstar.com, the analyst covering the fund designates a "role in portfolio" for the offering. This designation reflects our opinion on the best way to use certain types of funds in the context of a well-diversified basket of holdings.
Three designations are possible: Core offerings are portfolio anchors, the kind of funds you'll want to invest most of your assets in. Specialty funds, on the other hand, should be used (if at all) for just a very small sliver of your portfolio. Funds designated as supporting players, meanwhile, should be used judiciously in order to diversify your portfolio in terms of style, strategy, market-cap focus, etc.
Say, for instance, that you're heavily invested in a value-oriented large-cap fund--an area of the Morningstar style box replete with core holdings. Depending on your investment time horizon and risk tolerance, you might want to consider increasing your exposure to smaller-cap growth stocks. The added diversity should give you a smoother ride over time, after all, and help to buoy your portfolio when large caps or value investing fall from favor.
Shannon Zimmerman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.