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    What are the core and satellite strategy of building a portfolio?

    Synopsis

    Transaction cost is low as core portfolio is not churned frequently and so is volatility of the overall portfolio. The liquidity needs can be met through the satellite portfolio.

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    Core portfolio is geared to meet the long-term goals.
    1. In this approach, investors differentiate between two segments in their portfolio, core and satellite.

    2. Core portfolio provides stability and long term appreciation. The satellite portfolio offers an extra risk-adjusted return that pushes up overall returns.

    3. Core portfolio is geared to meet the long-term goals. It forms about 60-70% of the portfolio. Index, diversified equity or large cap equity and short-term debt funds make up this portfolio.

    JM Core 11 Fund-Growth ★★★★★
    Things You should consider
    • Annualized Return
      for 3 year: 3.95%
    • Suggested Investment
      Horizon: >3 years
    • Time taken to double
      money: 4.3 Years
    Things You should consider
    • Annualized Return
      for : %
    • Suggested Investment
      Horizon:
    • Time taken to double
      money: N.A
    4. The satellite portfolio forms a smaller part of the portfolio and is tactically managed to benefit from economic and market conditions. Long-term gilt funds, sector specific funds are some examples.

    5. Transaction cost is low as core portfolio is not churned frequently and so is volatility of the overall portfolio. The liquidity needs can be met through the satellite portfolio.

    (Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
    (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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