Morningstar 5 Star etfs for a Diversified Investment Strategy

Morningstar 5 Star ETFs offer a diversified investment strategy that can help you achieve your financial goals. These top-rated ETFs have consistently outperformed their peers over the long term.

The iShares Core S&P 500 ETF (IVV) is a prime example of a Morningstar 5 Star ETF. It has a low expense ratio of 0.04% and tracks the S&P 500 index, providing broad exposure to the US stock market.

Investing in a diversified portfolio of Morningstar 5 Star ETFs can help reduce risk and increase potential returns over time. This is especially true for long-term investors who can ride out market fluctuations.

The Vanguard Total Stock Market ETF (VTI) is another highly-rated Morningstar 5 Star ETF with a 0.04% expense ratio and a wide range of holdings.

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Morningstar 5-Star ETFs are a great place to start your ETF search. They have earned a 5-star rating from Morningstar, indicating that they have outperformed their peers over a full market cycle.

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To earn a 5-star rating, an ETF must have a Morningstar Medalist Rating of Gold, Silver, or Bronze, which is assigned by an analyst or driven by quantitative algorithms. The Medalist Rating is a forward-looking measure of Morningstar's confidence in a fund's ability to beat its peers.

The Medalist Rating is based on an assessment of the fund managers' approach to their investment strategy, the individuals who manage the fund, and the asset manager who offers the fund. These pillar assessments also account for other factors like Price and Performance.

WisdomTree US LargeCap Dividend ETF (DLN) is a great example of a 5-star ETF. It has a Morningstar Medalist Rating of Silver and a 5-star rating from Morningstar. This fund is passively managed and has a low cost, making it a great core holding in a portfolio.

Here are some key facts about 5-star ETFs:

Most 5-star ETFs are low-cost, passively managed funds that our analysts believe will tightly track a reasonable index over a long time frame.

Morningstar Medalist Ratings are a key factor in determining the best ETFs, with Gold being the highest rating on a five-tier scale that consists of Gold, Silver, Bronze, Neutral, and Negative.

The Medalist Rating is a forward-looking measure of Morningstar’s confidence in a fund’s ability to beat its peers, after accounting for fees and risk, through a market cycle.

Morningstar analysts assign ratings by assessing a fund's Process, People, and Parent, as well as other factors like Price and Performance. These pillar assessments are more important for passively managed funds, where the Process Pillar is more significant than the People assessment.

Low-cost, passively managed funds are often Gold-rated, as they are expected to tightly track a reasonable index over a long time frame.

Morningstar Medalist Ratings are a crucial part of the fund selection process, helping to narrow down the scope of top-performing funds.

To find the best large-value funds, Morningstar screens open-ended and exchange-traded funds in the top 33% of the category, using their lowest-cost primary share classes for the last one-, three-, and five-year periods.

Funds with a Morningstar Medalist Rating of Bronze, Silver, or Gold are also considered, while those with assets under $100 million or less than 100% analyst coverage are excluded.

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Stock ETFs are a great way to invest in the stock market, and they come in many forms.

Most of the best stock ETFs are passive, broadly diversified US large-cap stock funds that can fill a core spot in a portfolio.

Investors with long investing horizons will likely put most, if not all, of their portfolio assets into stocks.

Large companies dominate the stock market, accounting for over 75% of the US market's value.

ETFs in the large-blend category are a good choice because they include both growth and value stocks.

All but six of the best large-cap US stock ETFs are passive, making low-cost index funds a great option.

International stock exposure can help counterbalance some of the risk in your US-specific investments.

ETFs in the foreign large-blend category are good candidates to anchor your portfolio.

You can use a single ETF that covers both domestic and international stocks, such as those in the global large-stock blend category.

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Bonds can help reduce risk in your portfolio, especially as your investing timeline gets shorter and your goal shifts from maximizing returns to maintaining accumulated wealth.

Low expenses are a bigger performance differentiator for safer, low-returning assets like bonds than for higher-returning assets like stocks.

Low-cost ETFs can be valuable building blocks for bonds, which is why it's essential to look for them.

If short-term cash needs aren't a concern, high-quality intermediate-term bond funds are good options for fixed-income exposure.

There are also high-quality offerings in the intermediate core-plus bond category if you want to lean into some noncore bond exposure.

Municipal bonds can be a good option if you're looking to hold bonds in a taxable account, although traditional mutual funds are generally recommended for muni exposure.

One municipal-bond ETF managed to earn a Gold rating, making it a great option to consider.

Short-term and inflation-protected bond ETFs can provide diversification in a bond-heavy portfolio and help cover short-term spending.

Treasury Inflation-Protected Securities can be particularly helpful in adding some defense against high inflation, but they're best kept in a tax-sheltered account due to their high tax costs.

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If you're looking for top-rated ETFs with a Morningstar 5-star rating, here are a few options to consider.

The WisdomTree US LargeCap Dividend ETF (DLN) has a Morningstar Medalist Rating of Silver and a 5-star rating.

This ETF fully replicates the WisdomTree LargeCap Dividend Index, which weights 300 of the market's largest dividend stocks by their projected cash dividends and boosts those with the best-combined quality and momentum characteristics by 50%.

The Vanguard S&P 500 Value ETF (VOOV) also has a Morningstar Medalist Rating of Silver and a 4-star rating.

The S&P 500 Value Index, which this ETF tracks, starts with stocks in the S&P 500 and calculates a value-growth composite score for each stock.

Here are some key ETFs to consider:

Large-value funds invest primarily in large US stocks that are less expensive or growing more slowly than other large-cap stocks. These stocks are defined as large-cap, making up the top 70% of the capitalization of the US equity market.

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Over the past year, large-value funds have returned 29.3%, while the overall market has gained 34.38%. This is a significant difference, and it's essential to consider the performance of large-value funds in comparison to the overall market.

Large-value funds have a unique investment strategy, focusing on low valuations and slow growth. This approach can lead to lower returns, but it can also provide a more stable investment option. I've seen many investors prefer this approach, especially during times of market volatility.

To find the best large-value funds, you can look for those with a Morningstar Medalist Rating of Bronze, Silver, or Gold. This rating is a great indicator of a fund's performance and quality.

Here are the top 10 large-value funds that meet these criteria:

These funds have demonstrated strong performance and are worth considering for your investment portfolio.