What does core-satellite investing involve?

Core-satellite investing is a strategy that combines a core portfolio with satellite investments. The core portion of the portfolio typically consists of diversified, low-cost investments, like index funds or ETFs, that provide stability and broad market exposure. This core aims to capture market returns over the long term, minimizing costs and ensuring that the main body of the portfolio is well-diversified.

In contrast, satellite investments consist of smaller allocations to higher-risk or alternative investments that are intended to enhance returns or provide diversification benefits. These could include actively managed funds, sector-specific investments, or niche strategies. The idea is to complement the core holdings with these satellite investments to potentially improve performance without significantly increasing risk.

This combined approach allows for a balance between the stability of the core and the pursuit of higher returns through satellite investments, thus catering to various risk profiles and market conditions. The other options do not accurately capture the essence of core-satellite investing; they either describe a single management style, miss the diversification aspect, or focus too narrowly on specific types of investments.