Investors who enter the mutual fund market are often confronted with a bewildering array of information and jargon that leaves them unsure of where to begin. Mutual fund websites are filled with information about large cap funds, small cap funds, sector funds, alpha, beta, style boxes and other esoteric concepts.

Brokers and financial planners readily recommend any number of funds and fund families for their clients, but some investment companies have much better track records than others. So where can customers go to get sound, unbiased information about a given fund or fund family? Read on to find out.

SEE: Morningstar Fund Report

A Definitive Resource
For decades, Morningstar has been regarded as the premier source of information on mutual funds in the financial industry. The first mutual fund sourcebook was published in 1984, and this resource has come to be used worldwide by millions of investors and thousands of financial advisors. Morningstar ranks, rates and analyzes thousands upon thousands of mutual funds, both load and no-load, as well as variable annuity subaccount funds. One of the major tools that Morningstar offers to investors is its one-page fund fact sheet. This sheet is packed with pertinent information about a given fund that allows investors to quickly evaluate its potential. Some of the data featured on this sheet includes:

Morningstar Style Box
This common tool classifies mutual funds into one of nine different categories, with separate sets of categories for equity and fixed-income funds. For example, a stock fund could be classified as a large-cap growth fund or a small-cap value fund, depending on its capitalization and investment objectives.

Vital Statistics
Every fact sheet lists the fund's contact information, inception date, total assets under management and minimum initial and subsequent purchase amounts at the bottom of the page, along with a complete breakdown of the fund's sales charge schedule (if there is one) for all share classes. All management and 12b-1 fees are included here as well.

Historical Performance
Morningstar fund fact sheets always display the average annual total return of the fund for the last three and six months, one, three, five and 10 years, as well as since the fund's inception. These numbers are run both with and without any pertinent sales charges being assessed for all classes of retail shares (and even institutional share classes as well in some cases). Cumulative total return numbers are also posted. Quarterly returns are shown for the previous five years.

Growth of $10,000
Each report contains a graph that charts the growth of a $10,000 initial investment made at the inception of the fund until the present, factoring in all sales charges and other expenses.

Star and Category Ratings
These are often the first indicators that investors look at when choosing a fund. The star rating ranks funds according to past performance within four broad asset classes, while the category rating is a more specific comparison of funds within the same style box.

Fund Composition and Holdings
A percentage breakdown of the individual security holdings within the fund by both asset class and sector is listed in detail. Each fact sheet also lists the fund's Top 10 holdings by company. Bond and other fixed-income funds also contain a breakdown of the average duration and maturity of the individual securities held by the fund.

Investment Objective
Every fact sheet prints the stated investment objective of the fund and the general investment strategy that will be used to achieve this objective.

Morningstar's Take
This portion of the fact sheet offers a brief commentary on the fund and the performance of its portfolio managers, and generally offers an opinion of the future performance of the fund for both the short and long term.

Technical Data
Morningstar analyzes a number of technical indicators for each fund, such as its Sharpe ratio, beta, alpha and other mathematical quantifications of the fund's risk, volatility and reward. These are always listed in a separate section as well.

Reinventing Itself
Morningstar went public in 2005. Since then, the company has continually refined and expanded its suite of products and services. Its services now extend beyond simple analysis and includes sophisticated money management software for financial planners and X-ray portfolio analysis services that allows planners and investors to see the potential overlap of holdings within their investment portfolios, adding additional tools to investors' arsenal.

Related Articles
  1. Mutual Funds & ETFs

    The 3 Biggest Mutual Fund Companies in the US

    Compare and contrast the rise of America's big three institutional asset managers: BlackRock Funds, The Vanguard Group and State Street Global Advisors.
  2. Mutual Funds & ETFs

    Understanding Lipper Ratings in Mutual Funds

    Take a closer look at the Lipper rating system for mutual funds and exchange-traded funds (ETFs), how investors should interpret it, and some possible criticisms.
  3. Bonds & Fixed Income

    Understanding The Sharpe Ratio

    This simple ratio will tell you how much that extra return is really worth.
  4. Investing Basics

    Beta: Know The Risk

    Beta says something about price risk, but how much does it say about fundamental risk factors? Find out here.
  5. Insurance

    Market Capitalization Defined

    Find out the differences between mega-, large-, mid- and small-cap stocks and how each suits different investing styles.
  6. Options & Futures

    Adding Alpha Without Adding Risk

    Learn how to generate higher returns in your portfolio while keeping the same risk profile.
  7. Retirement

    Annuities: How To Find The Right One For You

    Fixed, variable and indexed annuities offer different features. Find out which one fits your needs.
  8. Mutual Funds & ETFs

    4 Mutual Funds Warren Buffet Would Buy

    Learn about four mutual funds Warren Buffett would invest and recommend to his trustee, and discover detailed analysis of these mutual funds.
  9. Mutual Funds & ETFs

    Passively Managed Vs. Actively Managed Mutual Funds: Which is Better?

    Learn about the differences between actively and passively managed mutual funds, and for which types of investors each management style is best suited.
  10. Professionals

    How to Navigate Taxable Mutual Fund Distributions

    It's almost time for year-end capital gains distributions for mutual funds. Here's how to monitor them and minimize their tax impact.
  1. What are the main benchmarks that track the telecommunications sector?

    Performance measuring and benchmarking are constantly changing in the telecommunications sector because of the evolving dynamics ... Read Full Answer >>
  2. How do I judge a mutual fund's performance?

    A mutual fund is a pool of stocks, bonds or other funds from which an investor can purchase shares. Whether the mutual fund ... Read Full Answer >>
  3. Can mutual funds only hold stocks?

    There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
  4. How do mutual funds compound interest?

    The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
  5. Do mutual funds pay interest?

    Some mutual funds pay interest, though it depends on the types of assets held in the funds' portfolios. Specifically, bond ... Read Full Answer >>
  6. Why have mutual funds become so popular?

    Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!