How to use ETFs

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ETFs can be used as part of long-term investment strategy, as well as for tactical and short-term investments.

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Types of investment strategies

Investing in ETFs can be a simple and effective way of building a well-diversified portfolio at a low cost.

A popular approach to portfolio construction is to think about your investment portfolio with ‘core’ and ‘satellite’ components.

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The core typically uses passively managed ETFs to provide exposure to major asset classes (mainly equities and fixed income). A high growth portfolio might have a core with a higher proportion of ‘riskier’ assets like equities, while a defensive portfolio might focus more on assets like fixed income.

The satellite tends to hold more opportunistic investments, designed for specific outcomes and could include active investments, investments in individual companies and real estate or targeted ETFs.

This type of enhanced core-satellite investing is a flexible strategy that can be used to target specific investment goals and manage market volatility.

Some examples follow:

  1. A growth-oriented portfolio with a thematic tilt in the satellite

  2. Core investments: Australian and international shares ETFs, Australian and international fixed income ETFs and gold.

  3. Satellite investments: thematic tilts towards technology and emerging markets.

  4. An income-focused portfolio with a volatility focus

  5. Core investments: Australian and international shares ETFs, Australian and international fixed income ETFs and gold.

  6. Satellite investments: additional exposure to infrastructure for income and stability, additional exposure to commodities such as gold.

For more information about using this strategy effectively in your portfolio, download our comprehensive enhanced core-satellite investing guide.

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