The Core-Satellite Strategy: Building Portfolios to Withstand Uncertainty
During uncertain times, investors often make the mistake of altering their portfolios without a clear plan for what comes next. A well-defined strategy prevents that. Ours centers on a core-satellite approach to investing in global markets — here’s the rationale.
Why We Follow the Index
We are firm believers in long-term data, which consistently shows that active investing — picking individual securities and trading frequently — underperforms simply following the index with fewer trades. S&P Global’s SPIVA research is blunt: over 15-year periods, only about 10% of large-cap fund managers beat their benchmark, often by a slim margin, and identifying those managers in advance is exceedingly difficult. Even when someone picks a winning manager, sustaining that outperformance is unlikely.
The Core: Matching the Market
Given those odds, our strategy focuses on matching the market through index-tracking ETFs rather than trying to beat it. Because so few managers outperform — and even fewer repeat — following the index virtually guarantees a portfolio ranks in the top decile of all managers, without active bets. This core typically forms 75–85% of the portfolio: a foundation that positions you near the top of the performance distribution.
The Satellites: Targeted Enhancements
Smaller satellite positions complement the core by adding specific return and risk characteristics that can improve results, enhance diversification, and potentially reduce total portfolio risk. Satellites may be ETFs or individual stocks, sized to the investor’s needs, time horizon, and risk tolerance — and they let a portfolio reflect specific preferences, themes, or convictions.
The Advisor’s Real Value: Behavior
Beyond building a diversified, low-cost portfolio, a skilled advisor adds value by ensuring the plan is actually followed — especially when events create uncertainty. A robust plan anticipates positive, negative, and unexpected scenarios and usually calls for patience. Returns aren’t generated by buying high and selling low, yet many investors inadvertently do exactly that. Trying to dodge the market’s worst days often means missing its best days, which frequently cluster during crises.
A crisis can even be an opportunity for the prudent investor — to deploy capital, buy quality at a discount, or simply hold steady and let the storm pass. Over the long term, the market has always recovered and reached new highs, whether in one year, two, or longer.
As Warren Buffett put it: the stock market transfers money from the impatient to the patient.
Is your portfolio built to withstand uncertainty? A core-satellite review can show whether your foundation is disciplined and low-cost — and whether your satellites are earning their place.
