Core and Satellite Investing Approach

Today I want to talk about the investing approach I use. It’s most commonly known as the core and satellite approach, and is probably one of the most common strategies used.

In this strategy, you will have two parts of your portfolio. The first part is your core component of your portfolio. This should make up the majority of your portfolio and consist of relatively safer companies or shares. These could be blue chip companies, or maybe ETFs or managed funds. This should be more of a passive component and shouldn’t require much managing at all. These shares should be bought and held for the long term to be able to grow.

The other part of your portfolio will be your “Satellites”. These can be slightly more risky stocks, such as small caps, biopharmaceuticals, cryptocurrency or other higher risk stocks. These should be a smaller portion of your portfolio. These shares will be more actively managed so will require more time from you to watch, and they may not be used in the buy and hold strategy.

The core makes up about 90% of my portfolio and consists entirely of ETFs. My satellites only make up about 10% and consist of individual companies. I still plan for my satellites to also be held for the long term which isn’t always the case in this strategy.

The idea of this strategy is that the core will provide you consistent, market returns, while the satellite allows you to have a bit of fun and try to beat the market without risking a large part of your portfolio. It gives you the best of both worlds and I believe is one of the best strategies for investing. Everyone uses the strategy a little differently, and the core and satellite percentages may change. However, as long as the core is providing those stable returns it is always good to have a bit of fun too!


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