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Help Morningstar Name Its Allocation Categories

Changes to the allocation categories mean new names are in order.

Securities In This Article
MFS Moderate Allocation I
Vanguard Balanced Index Inv
Columbia Income Builder A
MFS Growth Allocation I
MFS Aggressive Growth Allocation I

We updated a few of the allocation Morningstar Categories in April 2022, and we'd love your help to decide how (or if) we rename the categories to better reflect their new form.

The categories in question are the five U.S. allocation categories below, which are named after the expected equity weighting of strategies within the given category:

  • Allocation—15% to 30% Equity
  • Allocation—30% to 50% Equity
  • Allocation—50% to 70% Equity
  • Allocation—70% to 85% Equity
  • Allocation—85%+ Equity

Mutual funds, exchange-traded funds, and other investment strategies in these categories generally have relatively static asset allocations. They include straightforward 60/40 equity/fixed-income balanced funds like Vanguard Balanced Index VBINX, which is housed in the allocation—50% to 70% equity category and has a Morningstar Analyst Rating of Silver.

They also include funds offered in series, which are often named after an indicative risk tolerance level, such as MFS Conservative Allocation MACIX, MFS Moderate Allocation MMAIX, MFS Growth Allocation MGWIX, and MFS Aggressive Growth Allocation MIAGX (in the allocation—30% to 50% equity, 50% to 70% equity, 70% to 85% equity, and 85%+ equity categories, respectively).

While we primarily consider equity allocation when categorizing funds, in April we started incorporating the Morningstar Portfolio Risk Score. This method more systematically considers the increased risk found in nonequity asset classes, such as commodities or high-yield fixed income.

As a result, funds like Neutral-rated Columbia Income Builder RBBAX moved to the allocation—30% to 50% equity category from the allocation—15% to 30% equity category. Though the fund's average three-year equity allocation stands at about 20%, its 45% combined exposure to high-yield and nonrated bonds within its fixed-income sleeve markedly increases the fund's riskiness, particularly when markets fall. In contrast, the typical fund in the 15% to 30% equity group had less than a fourth of its fixed-income sleeve allocated to similarly rated bonds.

With funds now sometimes out of sync with the equity allocation indicated in the category name, this seems like a good time to consider renaming the categories. Here's one set of names that we've been trying out:

  • Conservative
  • Moderately Conservative
  • Moderate
  • Moderately Aggressive
  • Aggressive

And here's another:

  • Preservation
  • Cautious
  • Moderate
  • Growth
  • Aggressive

The variations are potentially limitless, and we can see pros and cons for all of them. Most important, though, is understanding what would be most useful and intuitive to investors like you.

Please consider helping us out via this survey. Or join the conversation on Twitter, being moderated by my colleague Bobby Blue.

Thanks in advance for your feedback! We'll make sure to follow up with results in a future article.

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About the Author

Janet Yang Rohr

Director, Multi-Asset Alternatives, Manager Research
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Janet Yang Rohr, CFA, is director of multi-asset and alternative strategies for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She is responsible for Morningstar Analyst Rating assignments for multi-asset and alternative strategies globally and oversees a team of analysts who cover these strategies. She also covers a variety of asset-allocation strategies, including target-date funds and 529 college-savings plans from John Hancock, State Street Global Advisors, BlackRock, and other asset managers.

Yang Rohr was a strategist, senior analyst, and director of Morningstar's multi-asset strategies manager research team before being appointed to her current role in 2016. Before joining Morningstar in 2010, Yang was vice president and investment product manager for multimanager funds and solutions as well as target-date funds for Northern Trust Global Investments in Chicago. She also served as a manager research analyst for Aon Investment Consulting, where she specialized in manager due diligence and the development of the practice's quantitative research process.

Yang Rohr holds a bachelor's degree in English and economics from Northwestern University and a master's degree in business administration, with concentrations in finance and entrepreneurship, from the University of Chicago Booth School of Business. She also holds the Chartered Financial Analyst® designation. In 2014, Institutional Investor magazine named Yang among its Rising Stars of Mutual Funds.

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