Core Sattelite Method And How It Can Increase Your Following
Oh, You haven’t heard about this method before? This is an investment method, and the name gives it all. The core-satellite investment strategy is an investment strategy in which the portfolio is divided into two parts; the core and the surrounding satellites.
According to Investopedia, the core-satellite investment is
a method of portfolio construction designed to minimize costs, tax liability, and volatility while providing an opportunity to outperform the broad stock market as a whole. The core of the portfolio consists of passive investments that track major market indices, such as the Standard and Poor’s 500 Index (S&P 500). Additional positions, known as satellites, are added to the portfolio in the form of actively managed investments.
What does this mean exactly?
It means that you should divide your portfolio into two parts:
- The first and more significant part is managed passively to minimalize costs, risks, and tax liability.
- The second part is managed actively to enable your portfolio to outperform the stock market.
This is my favorite investment method. It allows me to invest passively and save with…
