Every quarter, we reconstitute one subportfolio of the Morningstar Wide Moat Focus Index. When we do this, we re-evaluate the index's holdings and add and remove stocks based on a preset methodology. This helps keep the index true to its aim of providing exposure to competitively advantaged (wide-moat) stocks selling at the lowest current market price/fair value ratios.
The index consists of two subportfolios with 40 stocks each, many of which are overlapping positions. The subportfolios are reconstituted semiannually in alternating quarters, on a "staggered" schedule. Because stocks are equally weighted within each subportfolio, the reconstitution process also involves right-sizing positions.
Karen Wallace, CFP® does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.