Morningstar Advisor - Winter 2008 - 7

Letter from the Editor In Style To Don Phillips, one of the most elegant attributes of the Morningstar Style Box is how neatly it displays risk. By simply knowing where a fund lands on the style box, investors have a good idea of the fund’s volatility. Jerry Kerns “After launch in 1992, we ran the first studies on the style box,” he says. “We saw that risk levels as measured by beta lined up with the style box—increasing as you moved from large to small and from value and growth.” It holds true today. “I still think that’s a huge benefit of the sytem—how well it plays out. It’s just not random noise, but a system that describes real trends.” It’s these sort of insights that the style box was designed to provide. It gives investors a glance of the type of investments a fund holds, which in turn says a little about the fund’s risk and return characteristics. Overlay a portfolio on it, and the style box shows the areas to which the portfolio might have too much exposure—or which of the market’s outof-favor sections are worth adding. As a tool to monitor and construct portfolios, the style box has proven itself to be a very valuable assistant to investors. It also has served as a launching pad for many innovative tools and products, including the Morningtar categories, style indexes, and Ownership Zones. As the style box heads into its 16th year, we decided to take a look at the state of the style box and style investing. In the magazine’s Spotlight section (page 36), Christine Benz, Morningstar’s director of fund analysis, writes about some of the misconceptions about the style box—for example, that Morningstar recommends that investors have a fund for every area of the box (not true)—and she has suggestions on how to use it better. John Rekenthaler, who with Don created the style box’s original methodology, looks at another misconception—that adhering to a strict investment style somehow hinders the performance of fund managers. Morningstar’s research director finds no evidence to support that notion. Then, we discuss style investing with two people at Morningstar who manage investments—to gain an understanding of how style affects managers’ allocation decisions when assembling a portfolio. Finally, head to the back of the magazine to read Don’s column (page 96) for a little perspective of what the world was like pre-style box. As in every issue, however, we don’t stick to one investing topic. In Gray Matters, a new Ibbotson study (page 26) shows how private equity has a place in most portfolios. A separate article makes the same argument for options (page 22) while introducing a brand-new universe of coverage for Morningstar. In Undiscovered Managers, we profile John Keeley (page 66), who takes advantage of corporate restructurings to buy obscure small-cap firms, and Mary Ellen Stanek (page 62), whose commitment to low fees and steady performance has made her bond funds among the best. Financials stocks have fallen off a cliff, and to us, that means buying opportunities. Find 13 fund, stock, ETF, and separate account picks in this fallen sector in Investments a la Carte (page 70). And we’re introducing a new regular feature on fixed-income investing (page 81). Research by AllianceBernstein says that many advisors are not as comfortable working with bonds as they are with stocks. In an era of unstable equity markets and a high demand for income, we want to rectify that situation. This is the fourth issue of the Morningstar Advisor magazine, but it’s still a work in progress. We want to make every issue better than the last, and for that, we rely on feedback from advisors. Please let me know where we can improve. My e-mail address is magazine_editor@morningstar.com. MorningstarAdvisor.com 7
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Morningstar Advisor - Winter 2008

Table of Contents for the Digital Edition of Morningstar Advisor - Winter 2008

Morningstar Advisor - Winter 2008
Contents
Letter from the Editor
Inbox
How Do You Use the Morningstar Style Box?
Real Estate Investing Goes Global
The Golden Touch
Investment Briefs
Learning to Fly with Equity Options
Another Block in Building a Portfolio
In a League of Their Own
Unlock the Box
Fashion Change
The View from the Investment Side
Unpredictable Style
Weighting the Fundamentals
Wire-to-Wire Consistency
The Secret's Out
Focus on Financials
Strongest Homebuilders Will Withstand the Wrecking Ball
Breaking Style Conventions
Playing It Safe with Financials
Back to Bond School
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar
The Style Counsel
Morningstar Advisor - Winter 2008 - Intro
Morningstar Advisor - Winter 2008 - Morningstar Advisor - Winter 2008
Morningstar Advisor - Winter 2008 - Cover2
Morningstar Advisor - Winter 2008 - 1
Morningstar Advisor - Winter 2008 - 2
Morningstar Advisor - Winter 2008 - Contents
Morningstar Advisor - Winter 2008 - 4
Morningstar Advisor - Winter 2008 - 5
Morningstar Advisor - Winter 2008 - 6
Morningstar Advisor - Winter 2008 - Letter from the Editor
Morningstar Advisor - Winter 2008 - 8
Morningstar Advisor - Winter 2008 - Inbox
Morningstar Advisor - Winter 2008 - How Do You Use the Morningstar Style Box?
Morningstar Advisor - Winter 2008 - 11
Morningstar Advisor - Winter 2008 - Real Estate Investing Goes Global
Morningstar Advisor - Winter 2008 - 13
Morningstar Advisor - Winter 2008 - 14
Morningstar Advisor - Winter 2008 - The Golden Touch
Morningstar Advisor - Winter 2008 - 16
Morningstar Advisor - Winter 2008 - 17
Morningstar Advisor - Winter 2008 - Investment Briefs
Morningstar Advisor - Winter 2008 - 19
Morningstar Advisor - Winter 2008 - 20
Morningstar Advisor - Winter 2008 - 21
Morningstar Advisor - Winter 2008 - Learning to Fly with Equity Options
Morningstar Advisor - Winter 2008 - 23
Morningstar Advisor - Winter 2008 - 24
Morningstar Advisor - Winter 2008 - 25
Morningstar Advisor - Winter 2008 - Another Block in Building a Portfolio
Morningstar Advisor - Winter 2008 - 27
Morningstar Advisor - Winter 2008 - 28
Morningstar Advisor - Winter 2008 - 29
Morningstar Advisor - Winter 2008 - In a League of Their Own
Morningstar Advisor - Winter 2008 - 31
Morningstar Advisor - Winter 2008 - 32
Morningstar Advisor - Winter 2008 - 33
Morningstar Advisor - Winter 2008 - 34
Morningstar Advisor - Winter 2008 - 35
Morningstar Advisor - Winter 2008 - Unlock the Box
Morningstar Advisor - Winter 2008 - 37
Morningstar Advisor - Winter 2008 - 38
Morningstar Advisor - Winter 2008 - 39
Morningstar Advisor - Winter 2008 - Fashion Change
Morningstar Advisor - Winter 2008 - 41
Morningstar Advisor - Winter 2008 - 42
Morningstar Advisor - Winter 2008 - 43
Morningstar Advisor - Winter 2008 - The View from the Investment Side
Morningstar Advisor - Winter 2008 - 45
Morningstar Advisor - Winter 2008 - 46
Morningstar Advisor - Winter 2008 - 47
Morningstar Advisor - Winter 2008 - 48
Morningstar Advisor - Winter 2008 - 49
Morningstar Advisor - Winter 2008 - 50
Morningstar Advisor - Winter 2008 - 51
Morningstar Advisor - Winter 2008 - Unpredictable Style
Morningstar Advisor - Winter 2008 - 53
Morningstar Advisor - Winter 2008 - Weighting the Fundamentals
Morningstar Advisor - Winter 2008 - 55
Morningstar Advisor - Winter 2008 - 56
Morningstar Advisor - Winter 2008 - 57
Morningstar Advisor - Winter 2008 - 58
Morningstar Advisor - Winter 2008 - 59
Morningstar Advisor - Winter 2008 - 60
Morningstar Advisor - Winter 2008 - 61
Morningstar Advisor - Winter 2008 - Wire-to-Wire Consistency
Morningstar Advisor - Winter 2008 - 63
Morningstar Advisor - Winter 2008 - 64
Morningstar Advisor - Winter 2008 - 65
Morningstar Advisor - Winter 2008 - The Secret's Out
Morningstar Advisor - Winter 2008 - 67
Morningstar Advisor - Winter 2008 - 68
Morningstar Advisor - Winter 2008 - 69
Morningstar Advisor - Winter 2008 - Focus on Financials
Morningstar Advisor - Winter 2008 - 71
Morningstar Advisor - Winter 2008 - 72
Morningstar Advisor - Winter 2008 - 73
Morningstar Advisor - Winter 2008 - Strongest Homebuilders Will Withstand the Wrecking Ball
Morningstar Advisor - Winter 2008 - 75
Morningstar Advisor - Winter 2008 - Breaking Style Conventions
Morningstar Advisor - Winter 2008 - 77
Morningstar Advisor - Winter 2008 - Playing It Safe with Financials
Morningstar Advisor - Winter 2008 - 79
Morningstar Advisor - Winter 2008 - 80
Morningstar Advisor - Winter 2008 - Back to Bond School
Morningstar Advisor - Winter 2008 - 82
Morningstar Advisor - Winter 2008 - Mutual Fund Analyst Picks
Morningstar Advisor - Winter 2008 - 84
Morningstar Advisor - Winter 2008 - 85
Morningstar Advisor - Winter 2008 - 86
Morningstar Advisor - Winter 2008 - 87
Morningstar Advisor - Winter 2008 - Undervalued Stocks
Morningstar Advisor - Winter 2008 - 89
Morningstar Advisor - Winter 2008 - 90
Morningstar Advisor - Winter 2008 - 91
Morningstar Advisor - Winter 2008 - Most Popular Variable Annuities
Morningstar Advisor - Winter 2008 - 93
Morningstar Advisor - Winter 2008 - New at Morningstar
Morningstar Advisor - Winter 2008 - 95
Morningstar Advisor - Winter 2008 - The Style Counsel
Morningstar Advisor - Winter 2008 - Cover3
Morningstar Advisor - Winter 2008 - Cover4
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