WIN-WIN approach to Wealth under all market conditions
The SECRET OF WEALTHY Investors is that they follow
strategies and approaches which take less of their time but at the same time,
give better returns than the average portfolio and one approach which the majority
of Wealthy Investors swear by is the CORE AND SATELLITE approach to
investing.
THE CORE AND SATELLITE approach is suitable for
ALL TYPES OF INVESTORS and for all types of markets.
A poll in the Financial Times (June
2020) found that more than 2/3rd of
400 list of leading advisors have built core-satellite
portfolios for their wealthy clients.
CORE AND SATELLITE approach is one of the
simplest, effective, proven way to derive the best of both worlds of having a good
decent all-weather portfolio and also make good returns
CORE & SATELLITE approach
is to SPLIT your portfolio into 2 components namely the CORE part and the SATELLITE
part.
CORE part of the portfolio focusses on
LONG TERM and focus on BUILDING A STRONG FOUNDATION and making sure that
nothing can shake the strength of your portfolio. CORE component tends
to have Large Caps, High Dividend Yield, ETFs, REITs, and even Debt exposure.
SATELLITE part of the portfolio focusses on
giving you that EXTRA kicker (the extra returns) and focuses on companies which
could become MULTI-BAGGERs and consists more of Mid-caps, Small-caps, and even
Theme/Sectors with clear-cut idea to MAXIMISE returns.
CORE is the bedrock and broader-based
and the intent is to PROTECT
SATELLITE is more company-specific (could be
theme/sector funds too) and is geared towards EXTRA returns.
CORE part of the portfolio is BORING
and seldom needs your attention. CORE tends to give returns on par with
Index and maybe just a bit slightly more
SATELLITE part of the portfolio is more geared
towards the EXCITEMENT and needs constant monitoring and the investment
requires constant regular monitoring.
Benefit of Core and satellite is
It increases the productivity ....in a sense.... you can now
FOCUS on creating that EXTRA returns via the SATELLITE component of the
portfolio as CORE component does not require that much energy and
research
Of course, cost too as only the SATELLITE is being moved
in and moved out whereas CORE will STAY as it's intended for long term
To begin with... FOCUS more towards building up the CORE part
of portfolio till you get a hang of things and only later when you have
sufficient knowledge.... you should look at SATELLITE and increase the
same.
This applies to both Mutual funds as well as Direct
Equities
The default is to have 30% in Satellite part
of the portfolio and 70% in Core part of the portfolio.
Young investors and slightly aggressive oriented investors do
tend to have 60% in Satellite and 40% in Core
The percentage of your exposure to Core and satellite depends
on various parameters like your Risk Profile, Time Horizon which an experienced
MFD/CFP would be able to do for you.
It’s generally the rule of thumb that the exposure to Satellite
component of the portfolio is to be gradually reduced as you approach your
Retirement.
Do read my book DONT RETIRE RICH and give your valuable feedback and request you to post positive comments on Amazon. https://amzn.to/3cHUM6M/
The Perfect CORE & SATELLITE portfolio brings various
benefits like
a)
Provides adequate Diversification.
b)
Stable Portfolio hugely cushioning the negative
surprises.
c)
Requires less time than a full-fledged regular
portfolio
d)
Reduces transaction cost as only the SATELLITE component is tinkered with.
e)
Tax Outgo too is reduced
f)
Beats Inflation
g) The right balance between Risk and Returns.
h)
High Potential to outperform the Markets.
Core and Satellite is like
having the BEST CRICKET TEAM full of Top-Quality Batsmen, Top quality bowlers
and an amazing combination of All Rounders who can beat any team on any pitch
on any day!
NOTE:
The SATELLITE part of the portfolio should be Complimentary
to the CORE part and should make the portfolio COMPLETE in all aspects.
The idea is to PROTECT and at the same time, INCREASE RETURNS
without compromising on the safety aspect.
To conclude the CORE & SATELLITE is an approach,
ultimately to make this approach successful, you need to have the right kind of
funds/stocks to compliment them and for that, you need to have someone who is
EXPERIENCED enough who has successfully handled investors portfolio overall
types of market cycles.
Hence, it’s a request to please contact a proven successful
experienced MFD who has been there and done that and surely you will be on the
Expressway to super Wealth Creation Road.
Please note that there is no such thing as the BEST WAY TO BUILD
A PORTFOLIO.
Having said that CORE & SATELLITE is a proven concept
and should be seriously considered for a trouble-free Wealth Creation Journey.
All the best in your Wealth Creation Journey and Please DON’T RETIRE
RICH.
FIRE AND RETIRE WEALTHY WITH WEALTHY HABITS!
Regards,
Srikanth Matrubai
SRIKAVI WEALTH
Author : DONT RETIRE RICH
You are strongly encouraged to consult your financial planner before taking any decision regarding this investment. The views expressed here is the authors personal views and should not be intrepresented as a recommendation to invest/avoid.
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