For many retail investors, constructing a portfolio can feel like a balancing act between growth and stability, conviction and diversification, simplicity and opportunity. One popular framework for navigating these trade-offs is core-satellite investing. When implemented using ETFs, this approach can offer both structure and flexibility, helping investors stay anchored with their long-term investing goals while still pursuing targeted opportunities.
“At its heart, core-satellite investing is about balance,” says Marc Jocum, Senior Product and Investment Manager at Global X. “It allows investors to stay grounded while still exploring new opportunities, creating a portfolio that is both resilient and forward-looking.
“For investors seeking a practical framework to navigate increasingly complex markets, the core-satellite approach may provide a compelling path forward, bringing together structure and flexibility to help investors improve investment outcomes and stay the course.”
In this article, we explore what core-satellite investing is, how it works with ETFs, and why it has become an increasingly popular strategy among investors.
What Is Core-Satellite Investing?
At its simplest, core-satellite investing divides a portfolio into two components:
- Core: The foundation of the portfolio, typically made up of broad, diversified investments designed to deliver market-like returns over the long term.
- Satellites: Smaller, more targeted investments that aim to enhance returns or income, manage risk, express specific high-conviction views, or provide diversification beyond traditional exposures.
“The core of a portfolio is designed to do the heavy lifting, providing broad market exposure, consistency, and long-term growth potential,” Marc says. “Satellites, on the other hand, allow investors to lean into their convictions and seek additional sources of return.
“When combined thoughtfully, these components can create a portfolio that is both resilient and dynamic, helping to maintain the key pillars of investment portfolios while sill scratching that itch to explore different opportunities.”
Why ETFs Are Well-Suited to This Approach
ETFs have become a natural vehicle for implementing core-satellite strategies due to their accessibility, transparency, and breadth of exposure.
For the core, investors often use broad-based ETFs that track major indices, offering exposure to hundreds or even thousands of securities in a single trade. These ETFs are typically low-cost and designed to be held over the long term. Global X currently offers six core ETFs:
- Global X Australia 300 ETF (A300)
- Global X S&P World ex Australia GARP ETF (GARP)
- Global X S&P Australia GARP ETF (GRPA)
- Global X Australia ex Financials & Resources ETF (OZXX)
- Global X Russell 2000 ETF (RSSL)
- Global X US 100 ETF (U100)
For the satellites, ETFs open up a wide range of possibilities, covering specific sectors, themes, commodities, or geographic regions. This allows investors to express views or target opportunities without needing to pick individual stocks.
“ETFs have democratised access to investment opportunities,” Marc says. “Whether it’s global equities, emerging technologies, or commodities, investors can now build a diversified portfolio with improved precision and efficiency.”
The Role of the Core
The core portion of a portfolio typically represents the majority allocation, often 60%-90%, depending on the investor’s objectives and risk tolerance.
Its primary goals are to:
- Provide broad market exposure
- Deliver consistent, long-term returns
- Reduce portfolio volatility through asset class diversification
- Serve as a stable foundation for additional satellite positions
Core ETFs commonly track large, well-known indices and may include exposure to domestic equities, international markets, or even fixed income.
Marc emphasises the importance of this foundation: “A strong core helps investors stay invested through market cycles. It’s about building a portfolio that can weather uncertainty while still participating in long-term growth.”
The Power of Satellites
While the core provides stability, the satellite portion introduces flexibility and opportunity. Satellites are typically smaller allocations, often 10%-40% of a portfolio, that target specific investment themes or strategies.
These might include:
- Sector exposures (e.g. technology, healthcare, energy)
- Thematic investments (e.g. artificial intelligence, renewable energy, cybersecurity)
- Commodities (e.g. gold, copper, uranium)
- Geographic opportunities (e.g. emerging markets like China and India)
- Alternative strategies (e.g. income-focused or risk-managed ETFs)
“Satellites allow investors to personalise their portfolios,” Marc says. “They can reflect individual views, adapt to changing market conditions, or target structural trends shaping the global economy.”
This ability to customise is a key reason why the core-satellite approach resonates with retail investors. They can also act as a powerful psychological tool for investors too.
“Satellites aren’t just about outperformance but can also be seen as a behavioural tool,” Marc says. “By giving investors a space to explore, they reduce the temptation to tinker with the core, where discipline matters most.”
Why Investors Use the Core-Satellite Approach
There are several compelling reasons why investors adopt this framework:
1. Balance Between Stability and Growth
The core provides a steady base, while satellites introduce potential for outperformance. This balance can help investors pursue while helping to minimise risk.
2. Diversification with Intent
Rather than holding a collection of unrelated investments, the core-satellite approach encourages intentional diversification, anchoring the portfolio while selectively adding differentiated exposures.
3. Flexibility to Express Views
Investors can adjust their satellite allocations based on market trends, economic outlooks, or personal convictions without disrupting the core of the portfolio.
“One of the strengths of this approach is that it allows investors to evolve,” Marc says.
“You don’t need to overhaul your entire portfolio to reflect a new idea. You can simply adjust your satellites.”
4. Cost Efficiency
Using ETFs for both core and satellite exposures can help keep costs low compared to actively managed alternatives, which can improve long-term outcomes.
5. Simplicity and Clarity
By clearly defining the role of each investment, the core-satellite framework can make portfolio construction more intuitive and easier to manage over time.
Opening a World of Investment Possibilities
One of the most exciting aspects of core-satellite investing is the breadth of opportunities available within the satellite portion of the portfolio.
Investors are no longer limited to traditional sectors or markets. Through ETFs, they can access:
- Megatrends shaping the future economy, such as digitalisation, automation, and energy transition
- Niche industries that may be difficult to access through individual securities or thematics that don’t fit the standard style box definition.
- Global opportunities across developed and emerging markets that may be under-represented in broader based indices.
- Real assets and commodities that can diversify equity-heavy portfolios
This ability to go beyond the benchmark is a defining feature of the approach.
How to Think About Allocations
While there is no one-size-fits-all allocation, a common starting point is:
- Core: 70%-80%
- Satellites: 20%-30%
However, these weights can vary depending on factors such as:
- Risk tolerance
- Investment horizon
- Market outlook
- Level of conviction in specific themes
More conservative investors may prefer a larger core allocation, while those with higher risk tolerance or stronger thematic views may allocate more to satellites.
“It’s important that the satellite portion complements the core rather than duplicating it,” Marc says. “Investors should be mindful of overlap and ensure each position has a clear role within the portfolio.”
Practical Considerations
When implementing a core-satellite strategy with ETFs, investors may want to keep a few practical considerations in mind:
- Rebalancing: Over time, market movements can cause allocations to drift. Periodic or rules-based rebalancing helps maintain the intended balance between core and satellites.
- Risk Management: While satellites can enhance returns, they may also introduce higher volatility. Position sizing and diversification across multiple satellites can help manage this risk.
- Long-Term Perspective: The core-satellite approach is most effective when applied with a long-term mindset. While satellites may be adjusted more frequently, the core is typically designed to be held through market cycles.
