Investing using the Core-Satellite approach is akin to having a balanced meal. Like the main course, the Core keeps you going for the long run; and like specialty dishes on the menu, the Satellites capture a selection of in-season opportunities.
The Core is thus likened to a balanced diet of multi-assets for the longer-term, while the Satellites are opportunistic, short-to medium-term investments. Taken together, they provide the potential for higher-than-market returns and allow for stability spiced up with seasonality.
The Core-Satellite approach provides these advantages:
Components of a Core-Satellite portfolio
To provide stability, the main ingredients of your Core Portfolio should be:
These have the additional benefit of helping you to avoid emotional binging that can sway your investing decisions. By keeping you invested for the long-run like a nutritious meal, the Core Portfolio makes it less likely that you sell the “winners” prematurely when hungry for profit. Regular rebalancing also makes it less likely that you cling to “losers” in the hope of recovering losses. And so, you can ride out the markets’ ups and downs.
In contrast, your Satellites complement your steady Core, like seasonal fruits that bring you sweeter returns at certain times. They are:
A menu to satisfy every appetite
As every investor has a different risk appetite, your Core-Satellite portfolio should be designed according to your individual goals, personal situation, preferences, risk tolerance and the length of time you want to hold the investments for.
Assets should be allocated depending on the type of risk profile you have: Defensive, Conservative, Moderate, Balanced, or Dynamic.
Your priority is protecting your capital and you are willing to accept minimal risks. In return, you understand that you may receive minimal or low returns.
Your priority is to maintain your investment capital while seeking some investment returns.
You would prefer to achieve limited returns higher than short-term deposit rates by investing in low risk-rated products which have simple structure are not exposed to high volatility or low liquidity.
Your goal is to obtain moderate investment returns, either through income or capital appreciation, and are willing to take on moderate investment risk.
You are willing to invest in moderately risk-rated products which are not exposed to high volatility or low liquidity.
Your goal is to obtain higher investment returns, either through income or capital appreciation, and are willing to take on higher investment risk.
You are willing to bear with more volatile returns, lower liquidity , and some risk of losing part of the principle investment.
Your focus on maximizing investment returns opportunistically in an unconstrained manner, and you are willing to take on high levels of investment risk to do so.
You are comfortable with investing in complex or risk product with higher expected returns but also higher risk of loss, and you are prepared for volatile returns, low liquidity, and the possibility of losing part or all of your capital.
You may also wish to expand the size of your Satellite portions as opportunities arise, or as your needs change.
Putting together your own Core-Satellite portfolio can be as time consuming as whipping up a balanced meal with multiple side dishes. Speak with our investment experts to curate a menu of products for your personalised portfolio.
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This article is for information purposes only. We recommend you get in touch with your investment advisor for any financial advise.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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