Deconstructing the Core-Satellite investment concept
Investing using the Core-Satellite approach is akin to having a balanced meal. Like the main course, the Core keeps you going for the long run; and like specialty dishes on the menu, the Satellites capture a selection of in-season opportunities.
The Core is thus likened to a balanced diet of global multi-assets for the longer-term, while the Satellites are opportunistic, short-to medium-term investments. Taken together, they provide the potential for higher-than-market returns and allow for stability spiced up with seasonality.
The Core-Satellite approach provides these advantages:
Holding your assets for the long-term reduces the impact of market volatility at the end of the day.
- Diversification within the Core
Spreading your Core investments across and within asset classes and regions helps you maximise returns and minimise risk.
- Diversification from adding on Satellites
By taking advantage of market mispricing in the short-to-medium term, your Satellites add another layer of diversification, as they invest in trending themes and sectors.
Components of a Core-Satellite portfolio
|The Core||The Satellites|
To provide stability, the main ingredients of your Core Portfolio should be:
- Multi-asset to decrease overall volatility: bonds that are your carbohydrates for stable cash flow, equities that are your proteins for richer returns, and other assets that are like vegetables in your main course to diversify the risk
- Global for access to best-in-class assets and foreign investments
- Long-term because timing the market is difficult
These have the additional benefit of helping you to avoid emotional binging that can sway your investing decisions. By keeping you invested for the long-run like a nutritious meal, the Core Portfolio makes it less likely that you sell the “winners” prematurely when hungry for profit. Regular rebalancing also makes it less likely that you cling to “losers” in the hope of recovering losses. And so, you can ride out the markets’ ups and downs.
In contrast, your Satellites complement your steady Core, like seasonal fruits that bring you sweeter returns at certain times. They are:
- Opportunistic which means you can add them to enhance returns by taking advantage of trending themes and sectors
- Typically, short-term or sometimes medium-term investments
- Inclusive of technical factors and valuations
A menu to satisfy every appetite
As every investor has a different risk appetite, your Core-Satellite portfolio should be designed according to your individual goals, personal situation, preferences, risk tolerance and the length of time you want to hold the investments for.
Assets should be allocated depending on the type of risk profile you have: conservative, moderate, balanced, or aggressive.
|Preserving capital with minimal risk exposure.||Capturing some capital growth with low risk exposure.||Capturing modest capital growth through a balanced risk-and-return approach.||Maximising capital growth potential through exposure to a large portion in risky assets.|
You may also wish to expand the size of your Satellite portions as opportunities arise, or as your needs change.
Putting together your own Core-Satellite portfolio can be as time consuming as whipping up a balanced meal with multiple side dishes. Speak with our investment experts to curate a menu of products for your personalised portfolio.
Risk Disclosure and Important Notice
The information herein is for information only. DBS accepts no liability whatsoever for any direct, indirect or consequential losses or damages arising from or in connection with the use or reliance of this publication or its contents
Investment involves risks. The information provided is based on sources which DBS Bank Limited and DBS Bank (Hong Kong) Limited believe to be reliable but has not been independently verified. Any projections and opinions expressed herein are expressed solely as general market commentary and do not constitute solicitation, recommendation, investment advice, or guaranteed return. The above information does not constitute any offer or solicitation of offer to subscribe, transact or redeem any investment product. Past performances are not indicative of future performances. You should make investment decisions based on your own investment objective and experience, financial situation and particular needs. You should carefully read the product offering documentation, the account terms and conditions and the product terms and conditions for detailed product information and risk factors prior to making any investment. If you have any doubt on this material or any product offering documentation, you should seek independent professional advice.
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