Whether your goal is to build a house deposit, pay for education or create a retirement income, taking a measured approach to your investments can help. Most investors typically need to be able to preserve a certain level of capital, while also investing for long term growth or income. An enhanced core-satellite approach to building your investment portfolio can help you target your goals and manage market movements.
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What is enhanced core-satellite investing?
Enhanced core-satellite investing is a two-pronged approach to portfolio construction, where the core is made up of passive exposures to major asset classes (mainly equities and fixed income) and the satellite investments are more opportunistic and designed to seek specific growth outcomes, sometimes at higher levels of risk. Satellite investments could be targeted ETFs, actively managed funds or investments in individual companies or real estate.
Generally, the core might be 65-85% of the portfolio, depending on the investor’s goals, investment horizon and risk tolerance, while satellites tend to represent 15-35%.
Assisting you with your goals
This approach can assist investors in meeting their goals because it allows the main component to focus on long term growth and stability and use the satellite component to take on investing opportunities which may carry greater opportunity of returns alongside greater risk of loss to help meet specific goals.
Interested in finding out how this approach has worked during the COVID-19 pandemic? Read more
How this might look is as follows. An investor might use an ETF like ETFS S&P/ASX 300 High Yield Plus ETF (ASX code: ZYAU) to represent the Australian equities exposure in the core of their portfolio. They might then choose to incorporate a growth theme like robotics and artificial intelligence in their satellite portion by using an ETF like ETFS ROBO Global Robotics and Automation ETF (ASX code: ROBO).
Using ETFs in the investment portfolio can be beneficial due to characteristics like liquidity (allowing investors to be flexible based on needs or market conditions), low costs along with flexibility and variety. With a wide range available on the ASX, investors are more likely to find an ETF to meet specific goals or match particular views.
For more information on enhanced core-satellite portfolio construction or to find out more about using our range of ETFs in your portfolio, speak to ETF Securities.