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 Many investors tend to lean too heavily on short-term performance when choosing funds, said director of manager research Russ Kinnel. In this article, Kinnel looks at six funds that investors have been redeeming amid poor recent performance; however, he thinks these are solid funds in which investors should keep the faith.

4 Senior analyst Leo Acheson this week explained how Morningstar analysts evaluate the expenses charged by health savings accounts. "Ideally, HSA plans offer investment options with attractive expense ratios relative to retail mutual funds while limiting other fees, such as maintenance and investment fees," Acheson said. This article names four HSA options that boast below-average fees and thus earn positive price scores.

5% A 401(k) loan allows an employee to borrow his or her own money out of a 401(k) account. But unlike other types of loans, the 401(k) loan repayments and the principal and interest get paid back into the employee's own 401(k) plan. In other words, even though the stated 401(k) loan interest rate might be 5%, the borrower pays the 5% to themselves, for a net cost of zero. Although that might sound a pretty good option, financial planning expert Michael Kitces explains why it's a bad investment deal on his "Nerd's Eye View" blog.

4 In an environment absent volatility and eager to reward risky assets, volatility-based risk-adjusted return measures won't do a good job of alerting investors to an investment's potential risks. Funds that invest in historically volatile assets that have scored highly on risk-adjusted basis over the past five years may not look so great if we see a return to volatility over the next five years. We took a look at four highly rated core bond funds that have underperformed lately owing to their conservative positioning, but which have strong fundamentals and disciplined approaches that would likely help them hold up well in a risk-off environment.

3 Many investors are looking to simplify their portfolios. We asked Morningstar analysts to provide three low-cost ETFs that could work together to form a simple, diversified, low-cost portfolio.

4 The case for using simplified, ultra-well-diversified investment products is compelling, but it may be even stronger if you have something complicated going on with the rest of your financial life, either with your human capital or your total financial portfolio, says director of personal finance Christine Benz. In this article, Benz names four common idiosyncratic risk factors; if one or more of these apply to your situation, you may have good reason to keep your investment portfolio vanilla and hyperdiversified.

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