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Created on 24.01.2022

The core/satellite strategy: set your own priorities

With a personal investment strategy, you invest your assets in various investment instruments based on your risk appetite, risk capacity and investment horizon. The “core/satellite strategy” is a tried and tested investment strategy. Find out what makes it successful in this article.

A smart investment strategy should meet your own individual requirements. Read our article “Define and implement your investment strategy properly” to find out more. 

The right strategy will depend on how much risk you can and wish to assume. But remember: don’t put all your eggs in one basket. To invest money successfully, you need to diversify your assets broadly. Read ”Diversification – why you shouldn’t put all your eggs in one basket”.

The risk should be spread across as many different investments as possible. You can do this easily by investing in one or several funds. There is one strategy that has proved particularly effective and that suits many investors: the “core/satellite-strategy”.

The core/satellite approach is an investment strategy that has performed very well over recent years. The assets are distributed into a larger core element and a smaller one with so-called satellites. The core consists of around 80% of the total investment and is therefore the most significant part of the portfolio. The satellites allow investors to determine individual priorities, for example, with specialized funds, other securities or investing in shares with a higher risk but also the opportunity to generate higher returns. 

The core/satellite strategy: set your own priorities

The core/satellite strategy involves defining the majority of your invested assets as core capital. This helps map your basic strategy, and ensures you pursue this strategy consistently with around 80% of your investment capital. The core investment approach will help reduce your risk, since a broadly diversified asset allocation fund will usually act passively as your core investment. This is a mixed fund that comes with either a higher or lower equity component depending on your risk/return requirements.

The remaining 20% of your investment capital forms “satellites”. You can use these satellites or investments to invest actively in the individual areas that interest you, and you can set your very own priorities. For instance, if you feel modern technologies such as artificial intelligence or smart cities have a great deal of potential, you can actively invest the satellites in your portfolio specifically in a suitable thematic fund. You also have the option of investing some of your capital in sustainable projects or specific regions of the world. PostFinance offers a variety of funds, including nine of its own and around forty third-party funds.

Investments in shares and bonds from newer, less established sectors tend to entail a greater level of risk. That said, you can also use your satellite investments to limit your risk as well, which could involve optimizing your diversification with an investment in real estate.

All in all, the core/satellite approach can help you reduce your overall risk if you continue investing the majority of your assets, i.e. your core capital, in the wider market, whilst you use your satellites to invest in areas that interest you personally. This means you can factor your own thoughts into your investments without entering into any cluster risks that could jeopardize your total assets.

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