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ETF Methodology Update

Have you ever had trouble deciding whether you’re better off buying a mutual fund or an ETF?

Now you can use Morningstar’s ratings for funds to directly compare mutual funds and ETFs in the same Morningstar category.

This means that a 5-star large value mutual fund has outperformed a 3-star large value ETF on a risk-adjusted basis.

Similarly, an ETF with a Morningstar Analyst Rating of Gold is expected to outperform a mutual fund with a Neutral rating over a full market cycle.

This opens up a world of new possibilities. For example, now it’s easy to evaluate whether it’s worthwhile to pay slightly higher fees for an actively managed mutual fund or to choose a lower-cost passive ETF.  With the Morningstar Rating and Morningstar Analyst Rating, finding the right investment for your portfolio has never been easier.