Morningstar Advisor - October/November 2009 - 14

©2009 Morningstar. All rights reserved. The Morningstar name and logo are registered trademarks of Morningstar, Inc. Morningstar Advisor Fall 2008 Taxes Financials Managers American Funds MorningstarAdvisor.com The magazine of investing insights for independent-minded advisors Summer 2008 Spotlight Spotlight Summer 2008 A 529 Travel A 529 Travel Guide Guide Where to find find Where to goto go to the the best best plans, and plans, and the states where you’ll the states where you’ll find the worst. find the worst. Best Best Year plan was on best list best list Year plan was on Year plan was on worst list worst list Year plan was on Alaska T.Alaska Price College Savings Plan† Plan† Rowe T. Rowe Price College Savings ColoradoColorado Scholars Choice College Scholars Choice College Savings Program* Savings Program* Illinois Bright Start College Savings Illinois Bright Start College Savings Program Program Kansas Quest Advisor* Kansas Learning Learning Quest Advisor* Maryland College Investment Maryland College Investment Plan† Plan† MichiganMichigan Education Program Program Education Savings Savings Nebraska College Nebraska College Savings Savings Nevada 529 College College Savings Nevada VanguardVanguard 529Savings Plan* Plan* South Dakota College Access 529 South Dakota College Access 529 Utah Educational Utah Educational Savings Savings Virginia CollegeAmerica* a Virginia CollegeAmerica* a Virginia Education Savings Virginia Education Savings Trust b Trust b Worst Worst Features 2004 2006 2006 2005 2004 2004 2004 2007 2006 2005 2004 2007 2006 2005 2004 2008 2007 2006 2005 2006 2005 2004 2007 2006 2008 2007 2005 2006 2005 2008 2007 2007 2006 2006 2005 2008 2007 2006 2007 2007 2008 2008 2006 2004 2005 2005 2004 2005 2004 2008 2008 2005 Spotlight: College Savings 32 Work Your Way Through College Planning The number of hurdles grows to reach such a simple goal: financing a college education. 36 Sizing Up the Options We inspect the more popular college-savings vehicles and tally their pluses and minuses. 38 Best and Worst 529 CollegeSavings Plans Across the nation, many states clean up their messes, while others continue to offer bad plans. 42 A 529 Travel Guide Where to go to find the best plans, and the states where you’ll find the worst. 45 10 Tax-Smart Tips for College-Savings Planning Section 529 savings accounts need to be handled with care; otherwise, their tax benefits could turn into tax nightmares. Morningstar Conversation 50 Global Dialogue With profits falling and uncertainty spreading, T. Rowe Price manager Rob Gensler discusses his approach to investing in the world’s diverse markets. Undiscovered Managers 58 How Sequoia Cranks Out Good Returns Year after Year If you’re harboring doubts about Sequoia Fund’s reopening, cast them aside. It’s still a good mutual fund. 61 The Many Layers of David Winters A successful entrepreneur and world-class investor, Winters achieved both by taking an eclectic approach. AlabamaAlabama Higher Education 529 Higher Education 529 Alaska John Freedom 529* Every year since 2004, Morningstar’s Every year since 2004, Morningstar’s analysts analysts Alaska John Hancock Hancock Freedom 529* Arizona & Reed & Reed Plan* have chosen the worst 529 plans. have chosen the best and best and worst 529 plans. Arizona Waddell WaddellInvestEd InvestEd Plan* Iowa Advisor 529 Twelve plans have landed on a best Twelve different different plans have landed on a best Iowa Advisor 529 Plan* Plan* Education Savings Savings Plan lists, andlists, and they’re still deserving of investors’ KentuckyKentucky Education Plan Trust† Trust† they’re still deserving of investors’ Mississippi Adv Affordable money. One plan, Virginia CollegeAmerica, hasMississippi Adv Affordable College College money. One plan, Virginia CollegeAmerica, has Savings Program* a Savings Program* a made themade the list each year. Twenty-one plans list each year. Twenty-one plans Mississippi Affordable Mississippi Affordable College College have worst lists, several several no have made themade the worst lists,of which of which no Savings Program† b Savings Program† b longer exist. Wyoming College Achievement longer exist. Wyoming College Achievement 2008 2004 2008 2004 2008 a 2007 ba 2007 2007 b 2007 2007 a 2008 2007 2006 2006 2006 2005 2004 2008 2007 ba 2008 2008 2007 2006 2005 2004 b 2008 2008 2005 2004 a 2006 2005 2005 2004 ba 2006 2006 2005 2005 2004 b 2006 2005 2004 a 2008 ba 2008 2008 2005 2005 Nebraska AIM College Savings merged with Colorado’s in 2006, in 2006, and Nebraska AIM College Savings Plan* Plan* merged with Colorado’s offeringsofferings and New College College Savings Program† Tennessee BEST Savings Plan May. Tennessee BEST Savings Plan closed inclosed in May. New York 529 York 529Savings Program† North Carolina College Early thisEarly this year, Westclosed Corner- Corner- North Carolina National National College year, West Virginia Virginia closed Savings Program† Savings Program† stone SMART529 and Leaders SMART529 and stone SMART529 and Leaders SMART529 and Ohio Putnam CollegeAdvantage* Ohio Putnam CollegeAdvantage* merged the assets into the better merged the assets into the better Hartford Hartford Wisconsin EdVest College SMART529. A few other “worst” SMART529. A few other “worst” offeringsofferings Wisconsin EdVest College Savings Savings have since we cited them. Maine’s have improvedimproved since we cited them. Maine’s Improving Improving plan 2005 worst list, but list, but today, the plan made themade the 2005 worsttoday, the Maine College College Plan NextGen NextGenInvestingInvesting Plan’s broker- and Maine NextGen NextGenInvestingInvesting Plan College College Plan’s broker- and Missouri Missouri MOST 529 Advisor* MOST 529 Advisor* direct-sold solid choices choices for both residirect-sold plans areplans are solidfor both resiNorth Dakota College dents and nonresidents. Another 2005 dents and nonresidents. Another 2005 worst, worst, North Dakota College SAVE SAVE 2007 2006 2005 b 2008 2007 2006 2005 North College College SAVE Plan, North Dakota’s Dakota’sSAVE Plan, changed changed Closed/Defunct Closed/Defunct for the better when it dropped its for the better when it dropped its Morgan Morgan Arizona Arizona PF 529 aPF 529 a Stanley lineup for stellar index funds. Stanley lineup for stellar VanguardVanguard index funds. Arizona SM&R Missouri’s MOST 529 Advisor added Missouri’s MOST 529 Advisor Plan has Plan has added Arizona SM&R Family b Family b Tennessee BEST Savings Plan better funds and cut its to a more better funds and cut its expensesexpenses to a more Tennessee BEST Savings Plan West Virginia Cornerstone SMART529 a reasonable level since it worst list in reasonable level since it made themade the worst list inWest Virginia Cornerstone SMART529 a West Virginia Leaders SMART529 b 2007. tracks every plan listed since 2007. This mapThis map tracks every plan listed since West Virginia Leaders SMART529 b Wyoming College Achievement 2004. Keep it locate the nation’s nation’s best Wyoming College Achievement 2004. Keep it handy to handy to locate thebest and worst 529 and worst 529 plans. plans. 2006 2005 2004 2006 2005 2004 The College Savings Landscape: Choices are plentiful, as are the challenges. *Broker *Broker sold only sold only †Direct sold†Direct sold only only All other plans are available through both All other plans are available through both channels. channels. 42 Morningstar Advisor Summer 2008 42 Morningstar Advisor Summer 2008 MorningstarAdvisor.com 43 MorningstarAdvisor.com 43 Gray Matters Gray Matters Morningstar Conversation Another Block in Building a Portfolio Another Block in Building a Portfolio By Tom Idzorek Idzorek By Tom It’s now possible to proveproveprivate equity has ahas a place in a It’s now possible to that that private equity place in a diversified collection of assets. diversified collection of assets. New research from Ibbotson Associates New research from Ibbotson Associatesstudied—private equity improved the risk/ the risk/ A new waynewgaining access to the private private studied—private equity improved A of way of gaining access to the is shining shining lightrolethe role equity equityreturn characteristics of a model a model asset is light on the on private private return characteristics of asset equity asset class is emerging, however.however. It is equity asset class is emerging, It is should play in portfolios. should play in portfolios. allocation. allocation. accessible by all investors, it is easyitto easy to accessible by all investors, is maintainmaintain strategicstrategic asset allocation, a target a target asset allocation, The extraordinary performance of leading asset asset ourUntil our study, of private equity inequity in a and it resultsitin a mark-to-market time series series The extraordinary performance of leading Until study, the role the role of private a and results in a mark-to-market time allocators, like the Yale the Yale Endowment, coupledwell-diversified portfolioportfolio beennot been clearly does notdoes not suffer from return smoothing. The allocators, like Endowment, coupled well-diversified had not had clearly that that suffer from return smoothing. The with a lower perceived risk premiumpremium for with a lower perceived risk for understood. While defining defining theequity equityequities equities of traded firms whose whose understood. While the private private of publicly publicly traded firms traditional equities,equities, has considerable traditional has created created considerableasset class was straightforward, there wasn’t awasn’t a asset class was straightforward, there businesses are similar to those to those of traditional businesses are similar of traditional interest in alternative asset classes. classes. Over thewidely-agreed-upon time series ofseries of data interest in alternative asset Over the widely-agreed-upon time data private equity firms arefirms are being bundled together, private equity being bundled together, pas
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Morningstar Advisor - October/November 2009

Table of Contents for the Digital Edition of Morningstar Advisor - October/November 2009

Morningstar Advisor - October/November 2009
Contents
New on MorningstarAdvisor.com
Letter from the Editor
Contributors
How Do You Use Behavioral Finance in Your Practice?
Investing in the Moment
Investment Briefs
How the Best Large-Cap Managers Rise Above the Rest
Don’t Give Up on Stocks Just Yet
Makeup of the Mind
A Top-Down Approach
In Practice: Patterns of Investor Irrationality
A Call for Nudges
The Furious Comeback of Emerging Markets
Junk-Bond Pioneer
Four Picks for the Present
Consumer Staples Hold Up in the Kitchen
Familiarity Can Breed Bad Investment Decisions
Leave the ‘Junk Rally’ Behind and Look for Quality at a Reasonable Price
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks
New at Morningstar
Meet the New Boss, Same (School) as the Old Boss
Morningstar Advisor - October/November 2009 - Morningstar Advisor - October/November 2009
Morningstar Advisor - October/November 2009 - Cover2
Morningstar Advisor - October/November 2009 - 1
Morningstar Advisor - October/November 2009 - 2
Morningstar Advisor - October/November 2009 - Contents
Morningstar Advisor - October/November 2009 - 4
Morningstar Advisor - October/November 2009 - 5
Morningstar Advisor - October/November 2009 - New on MorningstarAdvisor.com
Morningstar Advisor - October/November 2009 - 7
Morningstar Advisor - October/November 2009 - 8
Morningstar Advisor - October/November 2009 - Letter from the Editor
Morningstar Advisor - October/November 2009 - Contributors
Morningstar Advisor - October/November 2009 - 11
Morningstar Advisor - October/November 2009 - How Do You Use Behavioral Finance in Your Practice?
Morningstar Advisor - October/November 2009 - 13
Morningstar Advisor - October/November 2009 - 14
Morningstar Advisor - October/November 2009 - Investing in the Moment
Morningstar Advisor - October/November 2009 - 16
Morningstar Advisor - October/November 2009 - 17
Morningstar Advisor - October/November 2009 - 18
Morningstar Advisor - October/November 2009 - Investment Briefs
Morningstar Advisor - October/November 2009 - 20
Morningstar Advisor - October/November 2009 - 21
Morningstar Advisor - October/November 2009 - How the Best Large-Cap Managers Rise Above the Rest
Morningstar Advisor - October/November 2009 - 23
Morningstar Advisor - October/November 2009 - 24
Morningstar Advisor - October/November 2009 - 25
Morningstar Advisor - October/November 2009 - 26
Morningstar Advisor - October/November 2009 - Don’t Give Up on Stocks Just Yet
Morningstar Advisor - October/November 2009 - 28
Morningstar Advisor - October/November 2009 - 29
Morningstar Advisor - October/November 2009 - Makeup of the Mind
Morningstar Advisor - October/November 2009 - 31
Morningstar Advisor - October/November 2009 - A Top-Down Approach
Morningstar Advisor - October/November 2009 - 33
Morningstar Advisor - October/November 2009 - 34
Morningstar Advisor - October/November 2009 - 35
Morningstar Advisor - October/November 2009 - 36
Morningstar Advisor - October/November 2009 - 37
Morningstar Advisor - October/November 2009 - 38
Morningstar Advisor - October/November 2009 - 39
Morningstar Advisor - October/November 2009 - In Practice: Patterns of Investor Irrationality
Morningstar Advisor - October/November 2009 - 41
Morningstar Advisor - October/November 2009 - 42
Morningstar Advisor - October/November 2009 - A Call for Nudges
Morningstar Advisor - October/November 2009 - 44
Morningstar Advisor - October/November 2009 - 45
Morningstar Advisor - October/November 2009 - 46
Morningstar Advisor - October/November 2009 - 47
Morningstar Advisor - October/November 2009 - The Furious Comeback of Emerging Markets
Morningstar Advisor - October/November 2009 - 49
Morningstar Advisor - October/November 2009 - 50
Morningstar Advisor - October/November 2009 - 51
Morningstar Advisor - October/November 2009 - 52
Morningstar Advisor - October/November 2009 - 53
Morningstar Advisor - October/November 2009 - 54
Morningstar Advisor - October/November 2009 - Junk-Bond Pioneer
Morningstar Advisor - October/November 2009 - 56
Morningstar Advisor - October/November 2009 - 57
Morningstar Advisor - October/November 2009 - Four Picks for the Present
Morningstar Advisor - October/November 2009 - 59
Morningstar Advisor - October/November 2009 - 60
Morningstar Advisor - October/November 2009 - Consumer Staples Hold Up in the Kitchen
Morningstar Advisor - October/November 2009 - 62
Morningstar Advisor - October/November 2009 - 63
Morningstar Advisor - October/November 2009 - Familiarity Can Breed Bad Investment Decisions
Morningstar Advisor - October/November 2009 - 65
Morningstar Advisor - October/November 2009 - Leave the ‘Junk Rally’ Behind and Look for Quality at a Reasonable Price
Morningstar Advisor - October/November 2009 - 67
Morningstar Advisor - October/November 2009 - Mutual Fund Analyst Picks
Morningstar Advisor - October/November 2009 - 69
Morningstar Advisor - October/November 2009 - 70
Morningstar Advisor - October/November 2009 - 71
Morningstar Advisor - October/November 2009 - 50 Most Popular Equity ETFs
Morningstar Advisor - October/November 2009 - 73
Morningstar Advisor - October/November 2009 - Undervalued Stocks
Morningstar Advisor - October/November 2009 - 75
Morningstar Advisor - October/November 2009 - 76
Morningstar Advisor - October/November 2009 - 77
Morningstar Advisor - October/November 2009 - 78
Morningstar Advisor - October/November 2009 - New at Morningstar
Morningstar Advisor - October/November 2009 - Meet the New Boss, Same (School) as the Old Boss
Morningstar Advisor - October/November 2009 - Cover3
Morningstar Advisor - October/November 2009 - Cover4
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