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ETF Strategy: Core Satellite investment strategy explained!

«Success is 20% Skills and 80% Strategy" - as one quote puts it. 

When it comes to investing, the investment strategy is perhaps even more important. Because the survey in the Wealth Letter As was frequently requested, today we are talking about the "Satellite Core", an equity or ETF strategy for building up your securities portfolio.

If you have any more questions on the topic, be sure to leave a comment!

Table of contents

Core Satellite investment strategy explained

ETF portfolio strategy beginners shares core satellite explained
  • General information about the Core Satellite Strategy: With the Core Satellite strategy you can use a classic ETF Buy and hold portfolio with Individual values supplement. To put the strategy in simple terms: A large core with broadly diversified ETFs (such as MSCI World) and a few risky, small individual investments such as shares in Tesla, Alibaba, Zurich Airport and Salesforce form the satellites. The core should generate a solid return and the Fluctuation keep it low. The satellites are the "profit generators", which are risky and also require a great deal of market knowledge and perhaps also market timing. Incidentally, the 80/20 split as shown in the picture is not fixed, nor is the asset class used (ETF, equities, precious metals, ...). Before we go into detail, let's take a quick look at who the strategy is good for:

  • For whom is Core Satellite suitable? The Core Satellite strategy is suitable for investors who like to spend some time and do market and stock research. For one thing, the core should remain steadily in proportion (keyword Rebalancing) and the satellites naturally require a certain amount of knowledge. But for us, the ETF strategy is great because 1. it is suitable if you don't have a savings plan (unfortunately not yet feasible in Switzerland in 11/2020!) and you enjoy investing and the associated effort. For example, if you enjoy researching the topic of electromobility and keeping up to date, then adding Tesla as a satellite to your ETF core, you are already going in the right direction.

  • Core: You can cover the core of the portfolio with solid, broadly diversified and, if necessary, passively managed securities (such as ETFs). The core ensures a solid return and should minimise the fluctuation or the Volatility ...contain it.

  • Satellites: In contrast to the core, the satellites are seen as profit generators. A few active niche ETFs (such as an ETF on electromobility) or a few individual shares could represent these. The satellites are riskier, are likely to fluctuate strongly, but should generate high returns in the long term. To ensure that the overall portfolio does not fluctuate as much, they are weighted significantly lower than the core (e.g. 20%).

Implement ETF strategy & build portfolio

Implementation of the Core Satellite Strategy: In practice, there are all kinds of ways to implement the strategy, not all of which we would like to list. After all, you can build up your portfolio in this way with a wide variety of asset classes. We would like to give you an example of an ETF strategy so that you can get a feel for what this might look like in practice. To do this, we use a simplified World portfolio according to Gerd Kommer and niche ETFs as satellites. You can find all ETFs at Swissquote.

ATTENTION: This is not an investment recommendation, but an example portfolio.

Core: 80% Share of the total portfolio, consisting of ETFs World and Switzerland

MSCI World - Example ETF: "WRDUSA" MSCI World from UBS
50% of the total portfolio 50%
Switzerland - Example ETF: "SPI ETF" from UBS
30% of the total portfolio 30%

Satellites: 20% Share of the total portfolio, consisting of 2 ETFs, gold and cryptocurrencies

Emerging Markets - Example ETF: "EMMUSA" Emerging Markets ETF from UBS
5% Share of total portfolio 5%
Real Estate ETF - Example: SRFCHA Real Estate Fund
5%
Commodity ETF - Example: ZKB Gold ETF
5%
Cryptocurrency - Bitcoin
5%

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Conclusion: Investment strategy ETF / Equities: Core Satellite

The Core Satellite strategy is somewhat uncomplicated to implement, even if it requires some effort. For investors who like to deal with their finances and also a little bit with the markets, it can be an interesting option. Not only as an ETF strategy, but also with shares or other admixtures it can be implemented and is therefore very useful.

If you want to learn step-by-step how to customise and build a solid investment strategy, you should read the FinanceTimetable take a closer look!

How do you see it? Would the investment strategy be something for you, do you follow a completely different strategy or should you Selma but would you rather do everything automatically for you?

Do you have any more questions or suggestions on this topic? Feel free to leave a comment!

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2 responses

  1. Should you open an extra deposit for the satellites (think financial flow says each or was it also gambling related)?

    Reply

    1. a separate custody account is not really necessary for this. depending on the provider, it may be better for clarity - but it was probably more related to the proportion of investment vs. speculation

      Reply

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