Core-satellite investing is an approach that marries the benefits of strategic asset allocation with the potential of market-beating returns. Commonly found in many institutional portfolios, this strategy has caught on amongst private investors. A poll found that 66% of money pros in the Financial Times 400 list of leading advisors have built some form of core-satellite portfolios for their wealthy clients. A time-tested strategy, the core-satellite approach is especially effective for long-term investing. One way to visualize it would be to think of a planet surrounded by its moons. There is a core of long-term index investments surrounded by complementary satellite investments. These satellites offer the potential of enhanced diversification, market out performance, or both. Therein lies its appeal: Many investors want to keep costs low and capture the market’s returns as efficiently as possible. But they also like the idea of holding a few investments that can offer...