A Beginning Investor's Online Tool Kit

A big part of what we do at Morningstar is help people to make sense of all that information, and Morningstar.com has lots of tools that can help with that goal. You can find links to all of them on our tools cover page. Here's an overview of those that are especially useful for beginning investors, including some tips on how to use them most effectively.

Narrowing the Field: Fund Screener and Stock Screener
One of the most daunting factors that any new investor faces is the sheer number of choices available. More than 7,600 stocks are publicly traded in the United States, along with a comparable number of mutual funds. Fortunately, you can turn to the basic and Premium Stock and Fund screeners on Morningstar.com to help narrow down the field.

The basic Fund Screener lets you choose among several options for each of 18 different data points, including broad fund group, fund category, costs, Morningstar Rating for funds, risk, returns, and portfolio features. For example, you could screen for no-load domestic-stock funds with 4 or 5 stars, assets of less than $1 billion, and an expense ratio below the category average. When you get the results, you can look at them using any of four views (Snapshot, Performance, Portfolio, and Nuts & Bolts), and you can sort them by clicking on any of the column headings, such as Expense Ratio or Total Assets. If you're not sure what something means, click on Analyst Insights at the top, and a popup window will appear in which you can get a detailed explanation of any of the data points.

The basic Stock Screener works in much the same way, except that its 18 data points include such factors as sector, Morningstar Style Box, market cap, stock grades, company performance, stock performance, and valuation. For example, you could screen for consumer-goods stocks with a market cap of at least $1 billion, a one-year return greater than the sector average, and a price/earnings ratio under 20. Here, you can see the results using one of five views (Snapshot, Stock Grades, Company Performance, Stock Performance, or Valuation), and you can sort those results by clicking on any of the column headings.

Going beyond these basic tools, Premium Members of Morningstar.com can use the Premium Fund Screener and Premium Stock Screener to do more-complex searches. There are many more data points available (55 for Premium Fund Screener, 82 for Premium Stock Screener), and for many of them you can enter any value rather than picking from a limited number of options. If having all of those choices seems intimidating, note that both premium screeners include a button at the top that allows you to gain access to a number of preset Morningstar screens, which you can modify in any way that you choose. These preset screens are a good starting point for learning how the premium screeners work. You don't need to do complicated searches to find useful information with these tools; with Premium Fund Screener, for example, you can search for all Fund Analyst Picks in a given category or funds with 4 or 5 stars.

The Big Picture: Instant X-Ray and Portfolio Manager
Finding good individual funds or stocks is important, but that's just a first step. It's just as important to make sure that your holdings fit together coherently in a portfolio and that this portfolio has the characteristics you want. For such big-picture analysis, Morningstar.com offers a couple of useful tools with which any beginning investor should become familiar: Instant X-Ray and Portfolio Manager.

Instant X-Ray allows you to see the key features of any portfolio at a glance. To use it, enter a ticker symbol and a dollar amount for each holding (which can include both funds and individual stocks), and click Show Instant X-Ray. You'll see a comprehensive summary showing the portfolio's stock/bond/cash mix, style-box characteristics, sector, stock type, and regional distribution, average fees, and average stock stats, such as P/E and market cap. Several of these measures are shown relative to the S&P 500's weightings, making it easier to see whether you might be overweight or underweight relative to that index. By using the drop-down menu, you can get more detail in any of 10 other views; for example, Stock Intersection shows you which individual stocks have the biggest weighting in your portfolio as a whole. By clicking Edit Holdings, you can modify the portfolio--say, by adding a fund that you're thinking of buying or excluding one that you're thinking of selling.

Once you have the portfolio you want, you'll need to keep track of it, and Portfolio Manager makes that task easy. If you've already input your portfolio into Instant X-Ray, just click on Save Instant X-Ray Holdings as a Portfolio at the top of the overview page, and it will automatically be imported into Portfolio Manager. Alternatively, you can enter a new portfolio from scratch, or import one from Excel, Quicken, or various other programs. You'll need to choose whether to create a Transaction Portfolio or a Watch List Portfolio, the main difference being that a Transaction Portfolio allows you to keep track of when you buy or sell shares over time and gives you access to your portfolio's Personal Returns. (For more on Personal Returns, see this article.)

After you've created or imported a portfolio and saved it, Portfolio Manager allows you to slice and dice it in all kinds of useful ways. The Tracking tab gives you access to six different views, depending on which data points are most important to you, and you can also create your own custom view using the My View tab. The icons along the top allow you to create a new portfolio; modify, rename, combine, or copy existing portfolios; and sign up for e-mail alerts in order to keep track of your portfolios or individual stocks or funds.

Morningstar.com Premium Members have access to some additional portfolio-related tools. Portfolio X-Ray, accessible to Premium Members from a tab within Portfolio Manager, shows the same information found in Instant X-Ray plus more. However, you can apply it to any of your saved portfolios, rather than having to re-enter all the portfolio details each time, as Instant X-Ray requires. Premium Members can also sign up for Portfolio X-Ray Alerts, under which you'll get an e-mail if your portfolio strays outside the asset-allocation targets that you set.

Other Tools
The screening and portfolio tools that we've looked at here are the most important ones for beginning investors to be aware of, but there are plenty of others to explore once you have a handle on the basics. For example, the free Fund Compare tool lets you compare funds with each other and rate them according to the criteria that are most important to you; this article by Andrew Gogerty provides a thorough explanation of this powerful tool's capabilities. Another free tool, Portfolio Allocator, lets you tailor an existing portfolio to meet specific allocation goals and risk tolerances or create a new portfolio to meet those goals. For Premium Members, Similar Funds lets you find other funds that are most similar to a target fund, within limits that you set. Links to all of these and more can be found on the Tools home page.