Morningstar Global Wide Moat Focus Index: A Deep Dive
Introduction
The Morningstar Global Wide Moat Focus Index is a stock market index that tracks the performance of companies with a wide moat.
A wide moat is a competitive advantage that allows a company to earn above-average profits for an extended period of time. This advantage can come from a variety of sources, such as a strong brand, a dominant market position, or a unique technology.
The Morningstar Global Wide Moat Focus Index is designed to provide investors with exposure to companies that have a strong competitive advantage and are likely to continue to generate superior returns over the long term.
Methodology
The Morningstar Global Wide Moat Focus Index is constructed using a proprietary methodology that identifies companies with a wide moat.
The methodology is based on five key factors:
- Intangible assets: This factor measures the strength of a company's brand, patents, and other intangible assets.
- Cost advantage: This factor measures the extent to which a company has a cost advantage over its competitors.
- Switching costs: This factor measures the cost to customers of switching to a competitor's product or service.
- Network effects: This factor measures the extent to which a company's product or service becomes more valuable as more people use it.
- Scalability: This factor measures the extent to which a company can increase its revenue and profits without incurring significant additional costs.
Performance
The Morningstar Global Wide Moat Focus Index has outperformed the MSCI World Index over the long term.
Since its inception in 2007, the index has returned an average of 11.2% per year, compared to 8.6% per year for the MSCI World Index.
The index has also been less volatile than the MSCI World Index, with a standard deviation of 14.5% compared to 16.2% for the MSCI World Index.
Conclusion
The Morningstar Global Wide Moat Focus Index is a well-constructed index that provides investors with exposure to companies with a strong competitive advantage.
The index has outperformed the MSCI World Index over the long term and has been less volatile.
Investors who are looking for a long-term investment with a high probability of success should consider investing in the Morningstar Global Wide Moat Focus Index.
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