Just like having a strong core is very important for building a healthy body, investing in a diversified passive core strategy, as a part of your total portfolio, is also very important. The new smallcase platform is built to help you achieve the same. On the new platform you can invest and track your core and satellites separately.
Building the core with All Weather Investing smallcase
Through the All Weather Investing smallcase, you can invest into gold, equities (stock market like returns) and fixed income (bank fixed deposit type returns) as a part of one single smallcase. This smallcase is designed to provide stable long-term returns and ensures that the core of your portfolio is strong, protected and growing.
The fixed Income portion of the All Weather smallcase always generates positive returns. The equities portion moves with the market to generate high long-term returns, while the gold portion protects your investment when the markets crash. Intelligent quarterly shuffling of your money in these asset classes through a rebalance ensures that your money is always in the right place at the right time.
A majority portion of your total investment should always be in the core – All Weather Investing smallcase. It should be the first step towards starting your investment journey.
Building satellites with other smallcases
Satellites are the investments apart from the core. On the smallcase platform, satellites are the portfolios that are riskier than the core All Weather Investing smallcase, but also have the potential of offering greater returns.
You should be investing into satellite smallcases along with the core All Weather Investing smallcase to generate alpha–additional returns. These smallcases give you pure equity exposure. Satellites are also divided into two parts– slow moving satellites (moderately risk smallcases) and fast moving satellites (high risk smallcases).
Slow moving satellites
These are the smart beta smallcases with an objective to generate more returns than the market. These smallcases only consist of large-caps, which are the top 150 market cap stocks listed on NSE. They are riskier than the core All Weather Investing smallcase and move up or down with the benchmark equity indices like Nifty. But with more risk comes more returns. These smallcases are perfect for long-term equity investing to generate market-beating returns. Three smart beta strategies are available on the platform.
Your first satellite investment should always be in one of the smart beta strategies.
Fast moving satellites
These smallcases majorly consist of mid-cap and small-cap stocks. They help you take exposure to themes, ideas and sectors of your liking. You can also invest in them for the short- and medium-term. They help you take exposure to themes like tourism, brand value and increasing rural demand, among others. These smallcases can generate high returns, but are very volatile in nature. Thus, you should look into investing in them only after you have built your core and have also invested in the slow moving satellites.
This is how you can use the core-satellite approach to build an investment portfolio with smallcases to create wealth over the long-term.
The core-satellite approach can be useful in building a healthy portfolio & gives the best possible risk-adjusted returns.
For more on building a core-satellite portfolio, check out the video below.
How much to allocate to Core vs. Satellites?
Many investors ask us how their money should be allocated between their core portfolio and their satellite portfolio. While investors have different financial goals, a portfolio that allocates 30% of the funds to the Core, an additional 30% to Slow moving satellites and the remaining 40% to Fast moving satellites is considered to be optimal over the long run. Such a portfolio keeps risk under control while also striving to beat the market.
Building a healthy portfolio is hard – we wanted to make it easier for you. You can now see your Portfolio Health on the Investments page, where we also suggest relevant actions (if any) that could help in improving the health of your current portfolio.
Please note, while our team has backtested and studied the characteristics of a healthy portfolio, the claims are not, and should not be considered as investment advice. If you need additional help, please get in touch with a registered investment advisor or a certified financial planner who can help you understand your risk-profile and come to a decision. Happy investing!
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Past performance of smallcases do not guarantee future results. Suggestions for investing in additional smallcases, are only for the purposes of ensuring proper diversification, on a best effort basis. These suggestions are derived from a fixed model without any reference to the investor’s risk profile, financial needs and goals. The above should not be construed as investment advice or as a solicitation to invest in any of the aforementioned smallcases. The investor is advised to consult his / her advisor prior to arriving at any investment decision.