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.

6 upgrades; 3 downgrades Our manager research analysts released our new Analyst Ratings and reports for 62 of the nation's largest 529 college savings plans.

"The 529 industry made meaningful improvements over the last year, with many plans reducing expenses and improving the asset-allocation approach used within the age-based portfolios by smoothing out the transition from stocks to bonds as the beneficiary ages," said senior analyst Leo Acheson.

Read about the six upgrades here. The three downgrades are here.

4% for stocks; 3% for bonds As part of her annual visit to the Bogleheads event in Valley Forge, Pennsylvania, director of personal financial Christine Benz sits down with Vanguard founder Jack Bogle to get his "reasonable expectations" for returns for the major asset classes. This year, his outlook wasn't too rosy. (Watch the whole conversation here.)

"[Using] a 50% U.S. Treasury 10-year ... and 50% corporate bond index, that gives me about a 3% average return on bonds for the coming decade. You can see that's very close to the stock return. So, it's a 1% equity premium. People are guessing what that premium will be. I don't presume to know. I don't start with the premium and end with the return. I start with the returns and end with the premium. I think, honestly, that's a better way to do it."

$1,100

Google parent

4 Those relatively new to bond investing won't want to miss senior analyst Eric Jacobson's explanation of four bond-fund basics worth knowing.

34%

"Amazon's third-quarter update made a convincing case that the network effect underpinning our wide moat is strengthening, with revenue trends before Whole Foods accelerating across most revenue categories and indicating greater engagement among Prime members, third-party sellers, and AWS users."

5 Morningstar's Sustainability Rating can help investors identify funds whose underlying holdings have strong sustainability characteristics. A 5-globe sustainability rating indicates that the fund's holdings fare better on ESG metrics than those of 90% of its peers. But the Sustainability Rating is not intended to identify a fund that has an intentionally sustainable or ESG mandate. It's possible that a fund without an ESG mandate by prospectus will score highly just by happenstance.

For funds that specifically claim to pursue a sustainability-related theme, the Sustainability Rating can provide a good reality check. It is not unreasonable to expect a fund with an intentional ESG mandate to have a 5- or 4-globe rating, said head of sustainability research Jon Hale. He examines five intentional ESG funds that have Morningstar Sustainability Ratings of 5 globes and also earn analyst medals.

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