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

by: Roger Nusbaum

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.