Ignorance is Bliss: Morningstar's (Non) Bias Against ETFs

Roger Nusbaum submits: Jen Ryan from TheStreet.com has a great article up that takes on Morningstar's apparent bias against ETFs, quoting several people including one slow witted blogger.

Morningstar of course denies it is biased against ETFs; they say they are not conflicted and that they just call them like they see them.

I have been critical of Morningstar many times here and once or twice for RealMoney.com. But let's take them at their word for a moment; straight-shooting, unconflicted opinion. OK, well then this is an admission that they have no ability or interest in forward looking analysis.

As the article points out, their ratings are based on past performance. UC Riverside Professor Barry Misha commented that you can't blame an ETF if it does well or not.

Think about that: How many times was last year's worse performing sector or country or something else this year's best performer?

Also, taking Morningstar at their word, they make no effort to explore how a narrow ETF might fit in to a diversified portfolio.

Clearly you will not need the vast majority of ETFs that exist, but that does not mean they don't merit unbiased study which Morningstar seems unwilling to do.

Comments

[Tim Moore:]

I think Roger is beingt a bit tough. Morningstar in September 2006 launched ETFInvestor a monthly newsletter the link is members.morningstar.co...;referid=EETLP6H

This is an excellent and reasonably priced publication and Sonya Morris the editor seems to be doing a good job.

Tim Moore

2006 Nov 09 08:38 AM

[Roger Nusbaum:]

Read Jen's article, she mentions this and says that one of the newletters was something like "ETFs you don't need" or words to that effect.

2006 Nov 09 07:42 PM

[Panskeptic:]

There's still an awful lot of noise about how anything other than DIA, SPY and QQQQ is too exotic, and not what ETFs are "supposed" to be about.

2006 Nov 09 10:25 AM

[Charlie Str...:]

Morningstar pans two new proposed momentum ETFs from FundX:

news.morningstar.com/a...;pgid=wwhome1a&amp...

Basically, there are three ways to invest: fundamental analysis, technical analysis and quantitative analysis. Those who follow price momentum (i.e. technical analysis) might find the FundX ETFs to be convenient for trading.

2006 Nov 10 07:13 PM