Core-satellite investing involves constructing a portfolio with two key components: the core, which forms the foundation, and the satellites, which are complementary positions. The core typically consists of diversified, low-cost investments such as exchange-traded funds.
Satellite positions may include more specialized investments focused on specific sectors, themes, or strategies.
This approach can be used by investors to achieve a balance between broad market exposure and opportunities for diversification. The core-satellite approach divides your portfolio into two parts:
Core: A foundation of broadly diversified, long-term investments designed to provide consistent exposure to global markets.
Satellite: Smaller, more tactical positions that aim to enhance returns, manage risk, or take advantage of specific market opportunities.
This structure aims to allow investors to establish or maintain a disciplined, cost-effective base while adding flexibility to adapt to changing market conditions or personal preferences.
Building a Strong Core
A well-constructed core should ideally be globally diversified, cost-efficient, and aligned with your long-term goals. Here are three examples of ETFs that may serve as core building blocks:
As a potential core fixed income holding, the Capital Group World Bond Select ETF™ (Canada) — CAPW brings together a diversified mix of global government and corporate bonds. The fund is actively managed to assist with navigating interest rate cycles, currency fluctuations, and credit risks.
The Capital Group Global Equity Select ETF™ (Canada) — CAPG can also serve as a core global equity allocation as its objective is to provide exposure to developed and emerging markets for long-term growth potential.
Capital Group International Select ETF™ (Canada) — CAPI focuses on international companies outside North America, with the goal of offering geographic diversification and access to global innovation and growth trends.
The Last Word
The core-satellite approach may offer investors the best of both worlds: a disciplined foundation for long-term investing and the flexibility to adapt to changing markets. By anchoring your portfolio with core funds like CAPG, CAPW, and CAPI, and thoughtfully layering in satellite strategies, you may be able to build a portfolio that’s both resilient and responsive.