Mutually Yours

Morningstar and Value Line's mutual-fund power tools

By Theresa W. Carey

Edited by Randall W. Forsyth

Though Morningstar beat Value Line into the mutual-fund ranking business, both companies have jumped into the electronic age, publishing their databases and rankings on CD-ROM. Both Value Line's Mutual Fund Survey for Windows and Morningstar's Principia cost $395 per year, with monthly updates, but there are some differences in what each can do.

The two programs are designed more for professional investment advisers than for individuals, but each allows any investor to assess a portfolio of funds. The similarities include spreadsheet-like interfaces and an incredible array of data fields for sorting and filtering. Both programs also offer graphing and several pages of in-depth data on each fund listed. And both use ratings based on historical performance; neither takes an explicit stab at predicting the future.

Morningstar's latest release of Principia, version 3.0, was published in February and is a 32-bit Windows application, designed to run under Windows 95 (or 98, if you're a Microsoft beta tester). We give it a rating of ** 1/2 . With a Microsoft Office-like interface, Principia takes advantage of many 32-bit frills, including the ability to pull up a shortcut menu with the click of a right mouse button, the power to open multiple documents simultaneously, and a toolbar that can be moved anywhere on the screen. Users of Principia version 2.2, which will be discontinued over the summer, will notice numerous changes. The toolbar is now a series of icons; passing the mouse over one of them invokes a bubble with a description. Each column of data-and there are 135 of them-can be moved, deleted or explained with a mouse click.

Morningstar Principia Plus takes advantage of many 32-bit frills, including the ability to open multiple documents.

Since it starts with about 9,000 funds, filtering down the available data to a usable number of components is an important feature in Principia. A click on an icon that looks like a funnel starts the filtering process. Once you've identified funds that interest you, they can be added to the portfolio view with a mouse click. Analyzing a set of funds in portfolio mode offers a look at the investment style of a group of funds, as well as overall performance. Should you pinpoint a weak area in a portfolio, it's easy to jump back to research mode to find the right fund to fill in the gap. Morningstar includes a four-page report for each selection, displayed using Adobe Acrobat 3.1. Graphical comparisons of the growth of a hypothetical $10,000 investment are easy to set up: Just pick a few funds and an index or two from Morningstar's long list.

Morningstar also publishes Principia Plus, aimed directly at pros, with its multi-user capability and $795 annual tab for monthly updates. Principia Plus includes more historical data on each fund, including any analysis written by Morningstar about the fund during its lifetime. Of interest to investment managers is the Portfolio Developer for Mutual Funds, a tool for optimizing a portfolio while taking into account investment strategies, loads and taxes. For entry-level analysts, Ascent provides basic research capability for $195 per year.

Value Line's Mutual Fund Survey 2.0, released in January of last year, also displays, in spreadsheet form, performance data for about 8,300 funds. It includes some fields not found in Morningstar's program, including performance statistics for bull and bear stretches and data on how well a fund weathered the October 1987 crash.

Value Line Mutual Fund Survey 2.0 is technologically a step behind.

Once again, however, Value Line is a step behind technologically. Mutual Fund Survey is a 16-bit application that can run under Windows 3.1, as well as Windows 95. But compatibility with 3.1 wouldn't seem that important for an application aimed at professional investment advisers and sophisticated individuals. (Less accomplished investors might check out an alternative: the company's scaled-down No Load Analyzer for Windows, which runs $149 annually.) Unlike Morningstar, Value Line offers data updates via the Internet or by dialing into a proprietary update service (a long-distance call for those outside the 212 area code).

Though its tools are a little out of date, Value Line has some analytical features that set it apart. If you're trying to make sure your portfolio is truly diversified, Value Line's correlation matrix is worth checking. It will display overlaps among funds in a set. You can also "stress test" your portfolio by plugging in some assumptions about changes in the markets, and then seeing what would happen if the funds behave the same way they did in the past under similar circumstances. Value Line also includes several calculators and a risk questionnaire to help investors set goals and choose a comfortable strategy. Value Line's program also earns ** 1/2 .

Technologically, Morningstar is superior. But Value Line still has a few tricks up its sleeve that make it worthwhile for investors who want to track the performance of mutual funds under specific conditions. You can give the program a test drive for $50. Morningstar's site, which was upgraded on May 1, offers a fund-selection database that, while much less detailed than the one on Principia, provides quite a bit for free. The Morningstar stock selector also is accessible under the "research" tab on the site. As a promotion, Morningstar's premium services are being offered free this month.

On the Web, both Morningstar (www.morningstar.net) and Value Line (www.valueline.com) offer some mutual-fund selection tools, as well as descriptions of their products.

Another good spot for investors is Investor Square (www.investorsquare.com), run by Monocle publisher Manhattan Analytics. Investor Square offers quick screening of its universe of funds, producing easy-to-read tables and graphs. Since the data are automatically updated on the Web site, you never have to worry about downloading new information or locating a CD-ROM. Monocle, reviewed in July 1997, isn't a mutual-fund selector per se, but it lets investors do technical analysis on performance, which can be quite helpful.