Learn how the core-satellite portfolio strategy blends low-cost index exposure with selective active positions—without making your fees explode.
What is a core-satellite strategy?
Instead of choosing active or passive, the core-satellite approach blends both. The “core” is typically cost-efficient passive investments designed to track a benchmark, while “satellites” are often active positions intended to potentially boost returns or manage risk.
Why advisors like it: costs can be controlled
Using active management for a smaller slice of the portfolio can help limit costs that may reduce returns.
The material even provides a hypothetical example showing how shifting part of a portfolio from higher-cost active funds to lower-cost index funds could reduce annual expenses.
The non-negotiable reminder
No investment strategy can assure a profit or protect against losses.
Tactical vs strategic: where satellites usually fit
Strategic asset allocation is long-term and built around goals, time horizon, and risk tolerance. Tactical allocation is more opportunistic and responds to shorter-term market conditions.
In practice, many portfolios keep strategy in the core, and use satellites for controlled tactical tilts.
Disclosure: Hypothetical examples are for illustration only and do not represent the performance of any specific investment. Investing involves risk, including loss of principal.