Economic Moat Investing
Warren Buffet is probably the person who many deem to be synonymous with the notion of Economic Moat Investing. In fact, this analogy actually came from him in one of his speeches in the Annual Berkshire Hathaway Shareholder Conference. From his early days of buying Cigar Butts, to extract whatever value is left from an unloved stock, to Charlie Munger’s approach of investing in companies with significant economics and a signifiant investment moat. Warren Buffet has proven himself to be the most successful investor to date. However, what is economic moat investing really and more importantly, are all economic moats great investment opportunities?
Warren Buffet may be the most successful investor but he started from Ben Graham’s Value Investing
Rationale behind each financial instrument
Put generally, every financial instrument is there to bridge a gap between demand and supply. This fundamental economic rationale for the existence of a product, exist not just in the space of manufactured goods but also in the financial world. Many may think that money is a transactional medium so there is no demand and supply dynamic. However, that cannot be further from the truth.
Imagine this. You have saved $100k in your personal account and will want to invest to beat inflation (although inflation is not necessarily bad for investors). You can invest your own money by opening your online trading account and buying retail stocks and reits. However, what if you do not have the time to manage it on your own? What if you want to buy products that only institutions can purchase? In that regard, you will start to form an effective demand for investment management products and services that are offered by fund houses and other investment management companies.
As every investor is different in their future needs and thus their investment requirements, it creates a need for financial instruments with various characteristics. These financial products can vary in terms of its risk tolerance and how it attempts to either compensate for or mitigate this risk. As a result, every financial instrument has its own investment thesis. In learning how to invest in Singapore as a beginner, we will be looking at the thesis behind popular asset classes. This can include REITS, Small Caps, Large Caps, Bonds, Gold and many more.
- Why you should invest in Reits in Singapore and how to buy them