Investing is complicated.
That’s the prevailing sentiment I hear from investors, whether they are new to the stock market or they’re coming to our firm after a few decades of retirement planning on their own or with another advisor.
But does investing have to be complicated? I would argue that with the right processes and framework in place, it can be much simpler than you think.
Unfortunately, the majority of approaches that have tried to simplify mutual funds (one of the most popular investment choices) for the average investor have been...lacking.
Morningstar is one of the companies that has tried to simplify the mutual fund selection process for the masses. Over the last thirty years, Morningstar has leapfrogged the competition in popularity and simplicity with its star rating system.
If you’ve ever done mutual fund research on your own or have any kind of experience in DIY investing, it’s likely that the Morningstar star rating is one of the methods you’ve used to identify how well a fund fits your portfolio.
Unfortunately, Morningstar has made the system so elementary that it is of no real use to long-term investors.