How to build a portfolio with a core-satellite strategy
Learn how a core-satellite investment strategy works, how to diversify your portfolio, and where your own investment ideas could fit in.
Building an investment portfolio can feel like a daunting task. It can be hard to know where to begin, what type of investments to hold, and how to make sure that you're properly diversified (not holding all your eggs in one basket).
The good news? You don't need a complicated set-up to get it right. One simple approach is the core-satellite strategy – a way to give your portfolio a solid foundation while still leaving room to back your own ideas.
Important information
This isn’t personal financial advice. Investing for 5+ years increases your chances of positive returns compared to cash savings. But investments rise and fall in value, so you could get back less than you put in. If you're not sure what's right for you, a financial adviser can help.
It's all about balance
Think of your investment portfolio like a solar system. With a core-satellite strategy, your core holdings are the sun – the foundation, or a more stable centre. Your satellites are the planets. They're the supporting investments that provide the finishing touches.
The core
This should make up 70% or more of your portfolio and be broadly diversified. Its job is to do the heavy lifting. It could be made up of a multi-asset fund, Exchange Traded Funds (ETFs) or one of our ready-made investments. The aim is to give you exposure to investment markets across a variety of regions and asset classes, avoiding the need for too many decisions once invested. It's the core that helps you sleep at night.
The satellites
This should make up to 30% and can be used to back your own ideas. Investments might include a collection of funds with a specific regional or sector focus, or individual company shares. If there's an idea that's caught your eye, this is where it might sit.
How a core-satellite approach can help to keep you grounded
As well as providing balance, a core-satellite approach can help you reinforce good investing behaviours, without too much time or effort. It can help to keep you:
Diversified – By making sure that your portfolio is built around a well-diversified core, you can reduce the chances of being overexposed to any single asset class, region or company. This is particularly helpful when markets are volatile – when things get choppy. Your spread of investments can reduce the chances of taking too much risk, or falling foul of 'all-in' mistakes.
Disciplined – Staying invested for the long term, without too much chopping and changing, can help reduce costs and set you up for success. Once you've chosen your investments, you can add to them steadily over time – and you can do this easily by investing monthly with a Direct Debit. By staying invested, you'll be able to let investment compounding work its magic.
Decisive – Confidence in your approach shouldn't be overlooked. If you're clear and comfortable here, you're more likely to stay invested and reach your goals. Stay engaged, without feeling overwhelmed.
How to get started
Our team of experts can help with investment inspiration.
For core investments – take the hassle out of investing with our expertly managed ready-made investments. HL fund managers combine different funds to form all-in-one portfolios. All you need to do is check in from time to time to make sure that it still aligns with your goals.
For satellite ideas – you could use resources like our Wealth Shortlist to filter funds selected by our expert analysts, or search for your own ETFs, shares and more.
The HL Ready-Made range is managed by Hargreaves Lansdown Fund Managers, part of the Hargreaves Lansdown Group.
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