Building a portfolio
Core and satellite
Holding a large low-cost index core, with smaller active positions around it.
How it works
The core provides broad market exposure cheaply and predictably. The satellites are where an investor expresses views, takes concentrated positions, or accesses specialist areas.
The structure keeps the cost and risk of the active part bounded by construction: if the satellites are 20% of the portfolio, no single view can dominate the outcome.
Related terms
- Index fundA fund that aims to match an index rather than beat it, at very low cost.
- Asset allocationHow you divide money between asset classes — the decision that drives most of your long-run experience.
- Concentration riskThe risk that too much of your outcome depends on one holding, sector, country or currency.
- Active managementChoosing holdings deliberately in an attempt to beat a benchmark.
More in Building a portfolio
- Correlation
- Covariance
- Drift
- Tactical asset allocation
- Effective number of holdings
- Strategic asset allocation
- Efficient frontier
- Sequence-of-returns risk
All 20 Building a portfolio terms · The full glossary, 433 terms
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