Mutual Funds: What is Core-and-Satellite Investing Strategy

As part of the investment portfolio design strategy, core, and satellite are easy and effective for long-term investing. 

The strategy looks at adequately combining passively and actively managed funds. The overall idea is to gain above-average returns with below-average risk.

In this regard, the core comprises the largest portion of the portfolio (80-85%), which may include large-cap index funds, diversified equity, and short-term debt funds, etc. A possibility of core holding could be a 60:40 mix of equities and government bonds.

The satellite comprises smaller investments in other funds or assets (15-20%) such as mid-cap stocks, small-cap stocks, fixed-income bonds, sector funds, gold, and money market funds, etc.

There is more need for rebalancing in the satellite portfolio, however. This is because the aim is to achieve higher returns from investing in particular assets.

The overall investment portfolio should be designed in a way to outperform a standard benchmark such as S&P 500 Index. 

Through this mutual fund investment strategy, an investor can look forward to stability and high growth while fulfilling the financial objectives. 

The core and satellite strategy allows an investor the option to create a portfolio that is more suited to their risk appetite while helping them achieve their financial goals. 

The core portion of the investment portfolio ensures stability with diversified risks, steadiness in return and long-term reliability. At the same time, the satellite portion of the funds is comparatively riskier considering their concentrated portfolio but provides equally higher returns in the short term. 

It is beneficial to seek out professional advice wherever required while designing an investment portfolio.

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