Making the Most of Morningstar: Determining the Market Cap of a Portfolio

The Morningstar User’s Guide is a series of articles discussing how to make the best use of the tools, research and analysis available at Morningstar.com.

In the series on asset allocation, we looked at the importance of the market capitalization (or market cap, for short) of a fund or portfolio. Today, let’s look at some free tools at Morningstar that can help determine the market cap of your portfolio.

It’s easy to determine the market cap of an individual fund. On the home page of Mornigstar.com, type in the ticker symbol of any fund in the “Quotes” box at the top left of the screen. Using Fidelity’s S&P 500 index fund (FUSEX) as an example (disclosure, I own shares in this fund), type in the ticker and you’ll be taken to the Snapshot for this fund. Scroll down the page to the Portfolio Analysis section and you’ll see two things that tell you the market cap of the fund. First, you’ll see the style box that shows the fund is a large cap blend fund (we’ll talk more about what blend means later in the Beginner’s Guide to Asset Allocation series). Second, you can see the weighted average market cap of the stocks owned by FUSEX, which is just over $51 billion. Here’s what the Portfolio Analysis for FUSEX looks like:

One of the great benefits of Morningstar is that you can analyze your entire portfolio, not just one fund at a time. From the main page, click on the portfolio tab and when your portfolio appears, click on the My View tab (this is explained in more detailed in the Morningstar Guide to determining mutual fund costs). Within My View, select the two data items that show us information about the market cap of our investments, which are Average Market Capitlaization (mil$) and Equity Style Box. You can find the data elements a couple of different ways. Perhaps the easiest way is to click on the General tab within My View and then select the Individual Holding link, which will bring up about 10 data options. Here’s what it looks like:

Add both Average Market Capitlaization (mil$) and Equity Style Box options and save the portfolio, which will take you back to the My View portfolio with both items added to the spreadsheet. Here is what mine looks like:

So what does this new information tells us? First, it displays a Morningstar style box for each fund in your portfolio. This is important to check periodically, because over time, funds will drift from one market cap category to another. A small cap fund, if its stocks increase in value, can eventually become a mid-cap fund. This doesn’t mean you run out and sell, but you do need to keep track of this and possibly make changes to future contributions or periodically rebalance to maintain your target asset allocation (a target asset allocation will be covered later in this series).

The second data element will tell you the weighted market cap for your portfolio. This information is helpful in comparing the market cap of your portfolio to the market as a whole. In my case, an average market cap of about $9.5 billion is significantly below the market weighted average. The reason is that my portfolio is weighted toward small cap funds, because I believe over the long run small caps will return more than large cap stocks. Again, more about building a portfolio later in this series.

This information becomes a little more useful when using Morningstar’s X-Ray feature. Morningstar has a limited X-Ray function available for free, and much more robust X-Ray feature for premium members.

Return to the Morningstar User’s Guide table of contents.