Morningstar Runs the Numbers

Inspired by Harper's Index (with a tip of the hat to FiveThirtyEight's Significant Digits blog), Morningstar Runs the Numbers uses a numbers-based approach to highlight recent Morningstar research, along with some outside news stories.

3 With U.S. stocks are midway through their ninth year of gains, many investors might find their portfolios are too stock-heavy relative to their targets. Director of manager research Russ Kinnel explains why it makes sense for investors to have an allocation to bonds, and shares three of his favorite core bond fund picks.

"I think bonds serve a purpose not just of giving you income but they are also a ballast. There are times when equities have gotten crushed and bonds even rallied or sometimes they at least held their value. And so, there is a really tremendous diversification value, especially as you get closer to retirement."

16 The U.S. stock market has been a pretty solid performer over the past three months. Though it's great for investors when sailing is smooth, bargain-hunters can have a tougher time in such an environment. To find some opportunities, we searched the companies under our coverage for stocks that have lost more than 20% of their value over the past three months. We then sifted through those beleaguered stocks and found 16 stocks that look like opportunities at current prices.

$4.2 trillion In its Federal Open Market Committee statement issued July 26, the Fed said it planned to leave the federal funds rate unchanged at 1% to 1.25%. The committee was vague about the timing and size of future adjustments to the fed funds rate, which they said will depend on economic conditions relative to its dual objectives of maximum employment at 2% inflation. The committee did say, however, that it plans to begin implementing its balance sheet normalization program "relatively soon." Fed minutes reveal that it may begin whittling down its hoard of Treasury bonds--currently totaling more than $4.2 trillion--as soon as September.

18%

4 Russ Kinnel explored the four Morningstar Medalists with the smallest asset bases. Kinnel says a benefit of smaller funds is being sure the managers have a long runway to keep executing their strategy without being overwhelmed by assets. Small funds also have the maneuverability to make the most of less-liquid holdings like micro-cap names or other stocks with a small float. Many funds lose that ability as they get larger, he said.

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