Andrew Allentuck

Monday, March 11, 2002


Morningstar Funds 500 2002 ed.
612 pages
ISBN 0-07-138771-4

Chicago-based Morningstar, Inc. does for mutual funds what Value Line does for stocks. Each is used as a bible by investors, in each case with some justification.

Canadian investors with accounts at U.S. brokerages can buy U.S.-based mutual funds. Often, the funds have much lower management expense ratios than their Canadian counterparts, are subject to more rigorous audit, and receive greater scrutiny from the press.

In the 2002 edition, the Morningstar team reviews the 2001 investment year, noting that technology funds fizzled and bond funds soared. Small caps funds did well; real estate funds also thrived. Will that happen in 2002? Morningstar alludes to regression to the mean and market rotation. Chasing last year's winners is precarious, they say.

For the future, Morningstar lists "great funds," mostly from large fund managers. The editors caution against investing in narrowly focused trendy funds, and lists managers who, they think add value to their portfolios.

For each of the 500 funds listed, Morningstar shows symbol, load, net asset value per unit, total assets, holdings at Sept. 30, 2001, provides a verbal analysis, a risk and return assessment, style analysis, sector weight chart, and performance and tax analysis.

For the investor who wants to get U.S.-based mutual funds, the Morningstar 500 is an essential reference. The numbers are vital, the writing is clear and honest. For accuracy and for candor, it sets a standard that many Canadian mutual fund guides could do well to emulate.