A core-satellite portfolio strategy is an investment allocation framework that structurally separates a portfolio into two components: a stable, broadly diversified “core” and more tactical, actively managed “satellite” holdings. This design aims to balance long-term stability with opportunistic growth.
Mechanism
The core typically consists of passive investments in broad market indices or highly diversified asset classes, providing consistent market exposure at lower costs. The satellites are specific, higher-conviction investments in individual securities, sectors, or alternative assets, such as particular cryptocurrencies or specialized DeFi strategies, intended to generate alpha or enhance returns beyond the core’s performance.
Methodology
The strategic approach behind core-satellite construction involves maintaining a significant portion of capital in the core for systemic market exposure, while allocating a smaller portion to satellites for tactical advantage. This methodology permits dynamic adjustments to specialized segments like crypto options trading or emerging digital asset categories without destabilizing the foundational portfolio, thereby managing risk and pursuing targeted opportunities.
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