If you do your own research on stocks, mutual funds, or ETFs, you know the importance of having access to data. Two common online investment research tools are Zacks Investment Research and Morningstar, Inc. Which one should you use, and when? Below is a breakdown of the differences.
- Zacks Investment Research and Morningstar Inc. are two of the most popular online investment research tools.
- Zacks is best known for its ranking system, which helps investors find stocks, mutual funds, and ETFs that are rising quickly.
- Morningstar's star-rating system evaluates securities based on their risk vs. reward.
- Zacks is more expensive and geared toward professional investors, while Morningstar is more affordable and designed to help a broader range of investors.
What Is Zacks Investment Research?
Zacks Investment Research is a research and analysis company that provides information to investors about stocks, mutual funds, and ETFs. Founded in 1978 by Leonard Zacks, this company offers free and paid services including independent research, financial data, and analysis to help investors make informed decisions about their investments.
Zacks may be best known for Zacks Rank, a rating system that is built upon the idea that stocks with rising earnings estimates can outperform the S&P 500. It also has ranking systems for mutual funds and ETFs. Zacks may be used by investing professionals, but it can also be used by independent investors.
According to Zacks, the Rank has more than doubled the S&P 500 for more than 25 years.
The Pros and Cons of Zacks
Zacks Investment Research can be a useful resource for investment-related information and analysis, but it may not be ideal for all investors.
- Zacks Rank: This rating systems for stocks, mutual funds, and ETFs can point investors to investments they can potentially include in their own portfolios.
- Variety of member services: Investors can sign up for and take advantage of free services, including a daily newsletter, timely articles, Zacks Rank, and more. Members can pay for Zacks Premium or Zacks Ultimate for $249 per year and $2,995 per year, respectively. These paid services include exclusive commentary and investment tools.
- Easy site navigation: The Zacks website is user friendly with intuitive navigation that enables investors to easily find the information they are seeking.
- Not ideal for beginners: Other than a handful of featured articles, beginner investors may not find much useful information on the Zacks website.
- Cost of Premium and Ultimate services: Unless you have hundreds of thousands of dollars to invest, it likely doesn’t make sense to pay nearly $3,000 per year for the Zacks Ultimate member package. While Zacks Premium is more affordable, it’s still unnecessary for a beginner or buy-and-hold investor.
What Is Morningstar?
Morningstar Inc. is an investment research firm that provides a variety of information, analysis, and services to investors on stocks, mutual funds, and ETFs. Morningstar (MORN) is a publicly owned company founded by Joe Mansueto in 1984 and based in Chicago, Illinois.
The founder of Morningstar, Joe Mansueto, was just a 27-year-old stock analyst when he decided to start the company right out of his apartment.
Morningstar rose to stardom in the investment community with its star rating, which ranges from one to five stars and is based upon historical performance and market risk. Morningstar is one of the best online mutual fund research sites. Morningstar now also offers rating and research for stocks and ETFs.
The Pros and Cons of Using Morningstar
Morningstar leads the pack in versatility: Investors from beginners to professional money managers rely on its investment data and analysis. However, it can be hard to find the information you’re looking for.
- Star rating: Investors can easily evaluate the risk/reward attributes of an investment by reviewing Morningstar’s Rating (one through five stars) before doing more research.
- Versatility: Morningstar caters to all kinds of investors, from beginners to skilled investors to professional money managers.
- Variety of products: Morningstar offers free information for any investor that chooses to navigate to its website. It also offers a free basic membership where users can unlock more data, including star ratings, the ability to connect a portfolio to Morningstar data, and access to article archives. It also has a premium membership, which includes access to analyst reports, investment picks, and more advanced screens. A one-year premium membership costs $199.
- Poor site navigation: Morningstar does not make it easy for the casual visitor to find information on its site. The home page is overloaded with articles and site navigation is not intuitive. However, once the user decides to subscribe to one of Morningstar’s member services, information becomes easier to access.
- Declining focus on beginners: Although Morningstar does offer educational articles on a variety of investment news and investing terminology, it has increasingly shifted its focus to financial professionals and advanced investors willing to pay money for its services.
Differences Between Zacks and Morningstar
Zacks Investment Research and Morningstar, Inc. are fundamentally similar in that they are both providers of investment-related data, research, and analysis, but there are a handful of key differences to know.
- Ratings: The Zacks Rating may be best for stocks and is based on rising earnings. Morningstar’s star rating may be best for mutual funds and ETFs, and is based on risk in relation to return.
- Type of investor: Zacks is geared toward advanced investors, short-term traders, and professional investors. Morningstar can be for all types of investors, including long-term individual investors and investment advisors.
- Investment research and layout: Both Zacks and Morningstar offer free and paid member services, but the information is presented differently. For example, when reviewing mutual funds, Zacks shows more basic data on the main quote page, whereas Morningstar offers more total information and the user must navigate to different pages to get the information.
The Bottom Line
Zacks and Morningstar both offer investors powerful tools for investment research and analysis, and both offer free and paid member services. However, Zacks may be best for advanced investors who trade stocks, and Morningstar may be best for investors who buy and sell mutual funds and ETFs.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.