The most important thing in investing is knowing what you own and why you own it. Often times, people treat stocks like a price tag hoping the sucker will go up. Investing without understanding what you've invested in is a guaranteed way to lose money — even if you make lot's of money in the short term.
In business terms, a moat is a competitive advantage that is difficult to copy or emulate. Having a moat matters because it keeps competitors at bay and protects profits. Businesses with strong moats will thrive while businesses without one cannot hope to survive. Finding these companies and investing in them for a very long time is the single, most effective way to build wealth. With the right framework finding these companies isn't as hard as you may think.
Competitive advantages come in various forms such a well-recognized brand to the ability to make similar products for cheaper than competitors. These moats can be categorized as intangible assets, cost advantage, switching costs, network effects and efficient scale. More information of each specific moat and its examples can be found here.
Discovering reliable investment ideas shouldn't be complicated. Nor should determining whether that investment is worthwhile be daunting. We made the moat card with simplicity and practicality in mind. The moat card is a framework that captures everything you need to know about a company — its moats, potential, risks, and valuation — all in under three minutes.