What happens if everyone indexes?

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<p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Christine Benz:&nbsp;</strong>Hi, I'm Christine Benz, director of personal finance for Morningstar. As assets flow into passively managed products, concerns have cropped up about some unintended consequences. Joining me to discuss the legitimacy of these concerns is Alex Bryan. He's Morningstar's director of passive strategies research for North America.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;">Alex, thank you so much for being here.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Alex Bryan:&nbsp;</strong>Happy to be here.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>It's good to have you in person, too, for a change. Let's talk about some of the things that we've seen swirling around ETFs and index funds. As they've grown, some market watchers have voiced concerns that there could be these unintended consequences. So, a biggie that we often hear is that somehow the flow of assets into indexes will cause the markets to be less efficient. It'll cause these, sort of like, market dislocations. Let's talk about just the thesis of why things might work that way.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>Sure. So, one of the concerns is that as more and more people invest in index funds, and more and more active managers kind of drop out of the market, there's fewer people that are dedicated to doing fundamental analysis on individual securities, and more and more people kind of buying and selling the entire market. In that case, if everybody pulls money out of the market, they may throw out the good stocks, the bad, and that could potentially cause more mispricing in the market than if you have more fundamental stock-pickers doing research and figuring out what each of these stocks are worth. So, that's the concern.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>And the mispricing would be a problem if I'm an index fund investor, because I could end up in some massively overvalued stocks, or ...?</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>That's a concern. Yeah. So, if the market is not efficiently priced, then you could end up owning big stakes and stocks that are overvalued. This was a concern back in the late 1990s when tech stocks were close to 40% of the S&amp;P 500 and those stocks were pretty overvalued. And so, there's that risk that if the markets aren't efficiently priced, you could end up owning a lot of things that are quite a bit expensive.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>So, is this something I should be worried about? And let's start with the perspective of if I'm a passive fund investor, but also, how about for active fund investors?</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>So, I think it's a concern that I think gets overblown. It's kind of this theoretical discussion that comes up in academic circles. What if everybody were to index? What happens then? I think it really depends on who's dropping out of the market. That's number one. So, if the people who are dropping out of the active market are managers who are less skilled, and I think that's more likely the case ...</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>Probably something we're seeing right now, right?</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>Exactly. If investors are kind of fed up with years and years of underperformance, and those poor managers drop out, the market could arguably become more efficient, because the managers who are left who are doing the research are arguably more skilled. So, that's one thing I would mention.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>The second thing is, although index funds have a pretty large share of total assets that are invested in managed funds, about 40% in the U.S., their share of trade volume is much lower. And that's because turnover in index funds tends to be a lot lower than the turnover ...</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>They're not trading.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>Exactly, they're not trading quite as much. Price discovery happens on the margin when shares trade hands. So, if index funds are accounting for a much smaller share of the overall trade volume than they are of total asset ownership, then actually active managers are still driving most of the price discovery that's happening. So, I think we're a long way from this being a problem. It's not to say that it couldn't be a problem at some point, but we're not there yet. And if we ever were to get to that point where there did, you know, become more mispricings, well, then active managers should start doing better and I think there will be this equilibrium that the market finds where people might shift back to active and back and forth until we find that equilibrium.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>That's what active managers are definitely helping, I know. Let's talk about another concern. You think this one is a little more legitimate. And this is in the case of indexes where maybe those securities are a little less heavily trafficked, where there is a reconstitution of an index fund that's tracking that space, that there can be higher transaction costs. Let's walk people through how this works, when index fund makes changes how that causes funds to have to play catchup.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>So, whenever an index fund reconstitutes, so when there's a &ndash; let's say, stocks that are removed from an index, well, everybody who tracks that index, like the S&amp;P 500, has to sell those securities at about the same time regardless of the price that they get. Now, what that tends to cause is, it causes the prices of those stocks to drop when they're removed. Similarly, stocks that are added to the index see a price pop when they're added, but oftentimes, the index investors are getting the less favorable prices because they're not able to buy those newly added securities until after the price goes up or sell until after the prices have gone down. So, this can cause the performance of the index to be a bit less attractive than it otherwise would be if it weren't forced to buy and sell on these predefined dates. And that's one of the reasons why a firm like Dimensional Fund Advisors doesn't like to track an index. It follows a broad market ...</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>To take advantage of these sorts of issues.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>Exactly, exactly. So, that's the concern. And it's, as you mentioned, more acute problem with less-liquid assets, like small-cap stocks, like high-yield bonds, that's where these costs tend to be more pronounced.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>So, what's the solution? Assume I want to track, say, a small-cap stock index, or I want that type of exposure in my portfolio, how should I address it to not be disproportionately burned by this problem?</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>So, I think there's one or two solutions. Number one, you could just own a total market index, where you're kind of on both sides of these trades, and it's a wash. So, if I own something like the Vanguard Total Stock Market Index, yes, there might be some stocks that go into and out of the S&amp;P 500 that are negatively impacted by that, but I already own them if I own the Total Market Index. So, I think that's one solution.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;">Now, if you want specific exposure to an area like small-cap stocks or high-yield bonds, I think it's a good idea to look for funds that are a bit less popular that have fewer assets tied to them, because that means that when there's changes to those&nbsp; indexes, there's less market pressure on the prices of those stocks, because there's less dollars going into or out of them. So, I think that's one thing to look for.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;">The second thing you want to look for is indexes that are taking steps to mitigate unnecessary turnover, because a lot of times, well, turnover is costly and a lot of times it doesn't add a lot of value. So, if you, let's say, you're a small-cap stock, and you migrate slightly into mid-cap space, well, that stock is probably going to have very similar performance to other small-cap stocks. So, it may not be worthwhile selling that. It may be OK to hold on to that. So, I think a fund like, let's say, Schwab U.S. Small Cap ETF. That's a less popular fund, and it's one that tracks an index that applies wide buffer zones to try to mitigate these types of unnecessary turnover trades.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>So, the buffer zone is there to keep things from slipping back and forth out of the small-cap space?</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>That's right.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>Let's talk about the last potential concern related to the growth of indexing. And that is that it could cause businesses to be less competitive, or it could cause the complexion of industry to be less competitive. Let's talk about how that would happen, why that would happen as a result of the growth of indexing.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>So, the concern is that index investors, asset managers who manage these, they own all the companies in the market. So, they don't necessarily have the same incentive to pressure managers to maximize the value of any single company. They may not be as concerned about one firm winning at the expense of another because they want to see all the firms in industry win. So, that's the concern is that this could potentially harm consumers, because it might create some anti-competitive behavior in the same way that if you see consolidation in a given industry, there might be less competition. The concern is that that same effect would happen if you have a couple of big institutional investors like BlackRock and Vanguard own all the airlines, for example.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>Right. Right. So, there's been some academic work on this topic, looking at a couple of different industries. You have written about this topic before as have some of our other colleagues. Do you think this holds water? Should people be concerned about this?</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>I think it's a weak argument for a number of reasons. Number one, I think managers of most companies are heavily incentivized to maximize their own shareholder--the value of their own company.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>So regardless of external pressures?</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>Regardless of external pressures, regardless of who owns the firm. I think managers in most companies, because they're paid very heavily in stock of their own companies and their bonuses are tied to their earnings and to their revenue, they're not really concerned about maximizing the industry's profitability, they're concerned about maximizing the results for their own firm. So, I think that's the first thing.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;">The second thing is that this argument makes this assumption that it's always in the firm's best interest or almost always in the firm's best interest to compete more aggressively. And I think oftentimes, it's just not the case. If GM, for example, were to cut prices on its automobiles, it knows that Ford is likely going to react and both companies will be worse off. So, I think the ownership of a company doesn't affect the optimal competitive strategy.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;" align="justify"><span style="text-align: left;">The other thing to note is that most index managers aren't really talking competitive strategy or pricing when they do engagements with their portfolio companies. They're more concerned about corporate governance, things like making sure that the board has proper experience, that the company is taking adequate steps to manage risk. They're not really talking about what business strategy the firm should pursue.</span></p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;">&nbsp;</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;" align="justify"><span style="text-align: left;">The other point I would note is that even if asset managers did want to influence corporate strategy, it's not obvious that they would want to maximize profits at the industry level, because they own all companies across all industries. So, higher ticket prices in the airline industry could actually hurt their holdings in the hotel industry. So, they may not necessarily want that. So, it's not obvious that index ownership is going to lead to less competitive behavior. I think at this stage, the argument is interesting, but I think it's a more academic argument and the empirical evidence really isn't persuasive as of yet. So, I think there's more work to be done in this area.</span></p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>Put that one on the backburner for now. Alex, it's always great to get your insights. Thank you so much for being here.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Bryan:&nbsp;</strong>Thank you for having me.</p> <p style="margin: 7px 7px 13px; padding: 0px; border: 0px; font-variant-numeric: inherit; font-variant-east-asian: inherit; font-stretch: inherit; font-size: 12px; line-height: inherit; font-family: Verdana, serif;"><strong style="margin: 0px; padding: 0px; border: 0px; font-style: inherit; font-variant: inherit; font-stretch: inherit; font-size: inherit; line-height: inherit; font-family: inherit;">Benz:&nbsp;</strong>Thanks for watching. I'm Christine Benz for Morningstar.com.</p>

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What the Afterpay acquisition means for investors: Morningstar Minute
05/08/2021  We believe the transaction has a high chance of succeeding.
Cannabis' federal legal status is not a total buzzkill
03/08/2021  The industry still has significant growth potential.
Stock of the week: Toyota
03/08/2021  Is one of the biggest sponsors of the Olympics positioned for an all-electric future?
2 listed microcap names to consider
23/07/2021  Morningstar's Lex Hall talks micro-cap stock picks with Carlos Gil, chief investment officer at Microequities Asset Management.
Big returns, big risks: Making money with microcaps
22/07/2021  Mornngstar's Lex Hall catches up with Carlos Gil, chief investment officer at Microequities Asset Management.
3 small-caps with Dawn Kanelleas
21/07/2021  The head of Australian small and mid-cap stocks at First Sentier Investors has her eye on ARB, Breville and IDP Education.
Forecast 2021–2022: A correction could be around the corner
20/07/2021  The strong performances of global stock markets in 2020–21 are unlikely to be repeated in the coming year says Morningstar's Peter Warnes.
'Overvalued' warnings grow as ASX 200 hits new high
12/07/2021  Morningstar equity analysts warn that equities remain overvalued despite Australia's strong economic recovery.
What to know about private equity
08/07/2021  Private equity is an exciting area for investors, with lots of hotly-tipped stocks. But there are risks to be aware of, says Pitchbook analyst Dylan Cox.
Lazard's 3 top picks for the global covid recovery
08/07/2021  Warryn Robertson is looking at French infrastructure, retail pharmacy and tax services.
Aussie banks $34bn surplus points to more shareholder dividends, buybacks
06/07/2021  Australia's largest banks have excess capital because they cut dividends, were more conservative on lending, divested assets and raised equity last year. Morningstar's Nathan Zaia thinks most of it should be returned to shareholders.
Weighing up the PEXA IPO
02/07/2021  PEXA burst onto the ASX this week in the biggest float since 2019. Morningstar's Gareth James gives his take on the company's future growth prospects.
Can the iron ore price keep rising?
30/06/2021  Iron ore prices have  been on a tear, boosting the profits of Australia's top miners.  How did we get here and is the only way up? Lex Hall sits down with Morningstar's Mat Hodge.
2 new stocks to watch
28/06/2021  Morningstar has recently initiated coverage of a food delivery app and a consumer finance product. 
'Strongest earnings season I've ever seen'
24/06/2021  Meeting the deluge of demand is the biggest task for US companies, says Bell Asset Management's Ned Bell.
Biotech beyond covid
22/06/2021  Are there still opportunities in the biotech sector now the covid-19 vaccine roll out is underway? We ask International Biotechnology Trust manager Ailsa Craig
Alibaba is still deeply undervalued
21/06/2021  Morningstar's director of Asia equity research is confident the e-commerce giant will bounce back.
Weighing up the Endeavour IPO
18/06/2021  A wide moat and attractive dividend potential are among the key takeaways of Woolworth's decision to demerge from the liquor and hospitality group.
'Then we got hit with the equivalent of a war'
15/06/2021  Lazard Asset Management's Warryn Robertson explains how companies in the Global Equity Franchise fund have adjusted to covid, and assesses the threat of rising inflation.
Understanding Magellan's active ETF strategy
11/06/2021  Magellan's Craig Wright tells Emma Rapaport why it is leading the charge in the active ETF arena and how its global equity product works.
3 off-the-radar small caps
10/06/2021  Callum Burns of ICE Investors explains his conviction in pharmaceutical distributor Ebos, PSC Insurance Group, and elite sports analytics provider Catapult.
Small cap gems and how to find them
09/06/2021  Callum Burns explains how ICE Investors identifies companies with original products and sticky customer bases.
Stock of the Week: Salesforce.com
08/06/2021  They’re building an empire.
3 oil stocks we still like
07/06/2021  A year ago the oil price went negative. How have oil giants handled the past 12 months and what's the outlook from here? Morningstar analyst Allen Good explains.
Considering crypto? Here's what to think about
04/06/2021  As the investment world goes crazy for crypto, Morningstar Investment Management's Dan Kemp explains what to consider before putting it in your portfolio
Why we like Wizz Air
03/06/2021  The airline sector is set to recover as international travel resumes. Morningstar analysts think Wizz Air offer the best opportunity among low-cost carriers.
3 global infrastructure picks
28/05/2021  4D Infrastructure's Sarah Shaw outlines the investment case for Spanish multinationals Cellnex, and Iberdrola, and the potential of Mexican airports.
Are crypto ETFs coming?
28/05/2021  The SEC continues to sort out its regulatory concerns.
Stock of the Week: Apple
27/05/2021  We’re raising our fair value as sales hit new highs—but investors need to put it in perspective, says Andrew Willis.
Opportunities in global infrastructure
25/05/2021  Covid-19 has enhanced rather than impeded the future for global infrastructure, says Sarah Shaw of 4D Infrastructure.
Tribeca's eye for Domain
24/05/2021  Tribeca's Jun Bei Liu also explains why she sees opportunity in sleep apnea specialist ResMed as well as Treasury Wine Estates.
Stocks for emerging markets
19/05/2021  American Century Investment's Patricia Ribeiro sees growth in Chinese battery technology, biologics, and building materials in Latin America.
2 stocks for the rise of the robots
18/05/2021  Robotics is a fast-growing area of tech, creating opportunities in medical, logistics and life sciences sectors and much more.
Square: Stock of the week
18/05/2021  Square's Bitcoin purchase is more marketing than operations
Tesla: Stock of the week
10/05/2021  If Elon Musk ends up delivering, we might need to raise our fair value to US$1500 a share.
Why Tribeca's so upbeat on stocks
07/05/2021  Banks and resources are poised to deliver dividends, and Treasury Wine Estates and BNPL are worth a look, says Jun Bei Liu of Tribeca's Alpha Plus long/short fund.
Looking for value in emerging markets
05/05/2021  Digital banking, ecommerce and 5G are among the key trends set for rapid growth, says Patricia Ribeiro of American Century Investments.
Cash slashed, Aussie equities up: Why Morningstar updates Model ETF portfolios
04/05/2021  Analysts have made changes to the fixed interest, property, cash and equity allocations of Morningstar's Model ETF Portfolios to take advantage of the current market environment. They've also refreshed some of the funds in the portfolio.
Investing basics: Explaining the disconnect between the stock market and the economy
30/04/2021  The stock market and the economy are not the same. Here's why.
Why deforestation matters for investors
23/04/2021  EARTH DAY 2021: Why should investors care about deforestation and how can it can be taken into account within an investment portfolio? 
The silent killer: How to prepare your portfolio for inflation
21/04/2021  Do investors need to worry about inflation, and how do you prep your portfolio to protect you from it? Morningstar Investment Management's Dan Kemp explains.
ESG investing is about more than feeling good: Morningstar equity research
20/04/2021  Values-based investing is ultimately up to the investor.
2 US wide-moat stocks to buy on a dip
16/04/2021  Amazon.com and ServiceNow are looking increasingly attractive.
Fidelity's Kate Howitt names her 3 top stocks for 2021
15/04/2021  Investment tips from Australian equities fund manager Kate Howitt.
Back to basics: What is income investing?
14/04/2021  What is income investing, why is it important and which investors should focus on it? Morningstar Investment Management's Dan Kemp has the answers.
Hunting for pockets of value in an overheated market: Morningstar
13/04/2021  Morningstar equity strategist Gareth James discusses the great value rotation, why he believes the Australian share market is overvalued and where opportunities still lie for hungry investors.
Vaccine rollout drives energy's rise
12/04/2021  But the sector's current tailwinds are likely unsustainable, so investors should prioritise high-quality businesses with stable balance sheets, says Morningstar's Dave Meats.
Finding value with Kate Howitt
08/04/2021  Kate Howitt oversees Fidelity’s Australian Opportunities fund. She discusses her investing approach, the outlook and where she sees value.
Investing for millennials
07/04/2021  Goldman Sachs's Laura Destribats talks about the millennial investment trend, and why tech and experiences are so important to this generation.
What if I want to buy Bitcoin?
06/04/2021  Remember that the returns on speculative assets like Bitcoin are high risk
EGG, SGF, ZBRA: Foraging for the unloved gems
01/04/2021  Steve Johnson explains why Forager Funds Management has bought and held Enero, SG Fleet and Zebra Technologies and why they're poised for further growth.
Why the 'covid spending economy' will flourish
30/03/2021  Forager's Steve Johnson explains why he's bullish on consumer spending, enterprise software companies, and why he has cashed in on big names like Uber.
Proteomics set for growth, says Kardinia
29/03/2021  Kristiaan Rehder explains why the West Australian biotech is among the top performers in the Bennelong Kardinia Capital Absolute Return Fund.
Should you be worried about inflation?
26/03/2021  And how to make inflation "personal."
Crypto what?
25/03/2021  The how, what, and why of cryptocurrency.
The long and short of an absolute return fund
24/03/2021  An absolute return fund aims to seek returns in all weather. Kristiaan Rehder from Bennelong Kardinia Capital explains how.
3 dividend-paying real estate stocks for your watchlist
23/03/2021  Diversified portfolios, strong balance sheets and healthy payouts. Grant Berry singles out three big contributors to the SG Hiscock Property Income Fund.
AREITs in the time of covid
22/03/2021  SG Hiscock's Grant Berry explains how real estate was affected by the pandemic, how property stocks coped, and the chase for income in an evolving retail landscape.
Have we reached peak video gaming?
19/03/2021  Video gaming has soared under lockdown, can this sector keep growing post-covid? Morningstar analyst Neil Macker takes a look.
Myer: five stars and poised for the rebound
18/03/2021  The retail giant's strong balance sheet will help it navigate the shift to online shopping and capitalise on the return to normal life, says Morningstar's Johannes Faul.
Deliveroo IPO: what you need to know
10/03/2021  Ahead of Deliveroo's IPO, Morningstar analyst Ioannis Pontikis looks at the outlook for the business, its valuation and concerns about gig workers.
2 stocks for the e-learning boom
08/03/2021  E-learning has become the norm for young students and university-goers across the world. Morningstar analyst Michael Field looks at whether the trend is here to stay. 
February Reporting Season Wrap Up with Peter Warnes: Webinar
04/03/2021  Special guest Peter Warnes, our head of equities research, joins the Morningstar Foundations of Investing Webinar series to give his unique take on February Reporting Season and answer subscriber questions.
One year after the market crash, through the ETF lens
03/03/2021  The growth and adoption of exchange-traded funds has only accelerated as a result of the latest market crisis.
Brighter picture for big four banks
01/03/2021  Morningstar's Nathan Zaia on the outlook for the banks, dividend payouts and the move by the Bank of Queensland to acquire ME Bank.
One year on: lessons learned from the 2020 bear market
25/02/2021  The biggest takeaway from that period is not to panic when the market tumbles.
What if...I want to buy a gold ETF?
23/02/2021  From ETFs backed by bullion to miners with more upside potential - here's how to get yourself some gold.
'Full return to normal in 2021'
23/02/2021  If the US is to stage a recovery by mid-year, it will need the consumer services sector to fire, says Morningstar's head of economic research Preston Caldwell.
Google, Facebook versus Aussie news stocks
19/02/2021  Morningstar's Brian Han weighs up News Corp's deal with Google and examines the effect of Facebook's decision to block content from Australian media outlets.
Global real estate as a store of value
18/02/2021  Quay Global Investors' Chris Bedingfield explains how self-storage, data centres and industrial property can offer diversification and growth.
Spotting the 'covid winners'
16/02/2021  Uniti Group and Nextdc are among the companies that SG Hiscock's Hamish Tadgell says have flourished during the pandemic.
The transition from hope to growth
15/02/2021  Hamish Tadgell of SG Hiscock explains the portfolio changes he’s made in a bid to capitalise on the shift.
The future of the US economy
10/02/2021  Which pandemic-related trends have already passed, and which ones might be around the corner?
GameStop frenzy is history repeating
05/02/2021  The battle between the Reddit army and hedge funds is nothing new—the question is will regulators be willing to step in, says Morningstar's John Rekenthaler.
Who are the fast fashion winners?
03/02/2021  Competition is fierce for fast fashion retailers such as Asos, H&M, Zalando and Inditex. Morningstar analyst Jelena Sokolova takes a look at the sector.
Can your portfolio withstand volatile times?
01/02/2021  Volatility can be around any corner, says Morningstar director of personal finance Christine Benz.
How much equity exposure is too much in retirement?
28/01/2021  Retirees require stocks' growth potential, but they need a cash and bond buffer, too.
Key trends for China investors
27/01/2021  Rebecca Jiang, manager of the JPMorgan China Growth & Income Trust, looks at why Chinese stocks soared in 2020 and whether the trend can continue.