Never before has the developed world seen the Fed print so much money. What will the unprecedented levels of quantitative easing today mean for the economy, and how should investors adapt to the new normal? The core-satellite investment strategy could be one possible approach. Here’s how you can execute it in your own portfolio.

Before you even think about what stocks to invest in, it is important to have and understand your own overall portfolio strategy. This is where the Core-Satellite approach has been gaining traction, especially among investors who wish to diversify across asset classes, sectors and regions to maximise returns and minimize risk. The core provides broad market exposure while the satellites offer the potential of enhanced diversification, outperformance, or both. In simple terms, this consists of:

The Core The Satellites
Long-term investments that form the bulk of your fund allocation Trend-based, more reactive in nature
  • Bonds for stable cash flow
  • Equities for higher returns
  • Alternative asset classes (eg. real estate, commodities, gold)
  • Emerging themes and sectors
  • Growing foreign market
Advertisements