Core/Satellite Portfolio Investment Style.

It follows, from the discussion of index vs stock picking investment, that portfolio investors have to make decisions about what style is for them. This is where the core/satellite design of growth portfolios arises.

Under this design a portion of the portfolio is put in lowest cost, index replicator funds while the rest is devoted to active management. How much in each is a choice the individual investor has to come to and it comes down to what your appetite for better-than-average returns is, much in the same way the gearing decision has to be reached.

Typically the more active investor will weigh more heavily into the satellite portion with a mix of active managers and perhaps direct stock investment - depending upon their own knowledge and the time they have for research. The passive style will appeal more to those with limited time for portfolio management. The cost of pursuit of an active style is research time, the cost of the latter is excluding the chance of above-average returns. Neither is more correct than the other, it is personal choice.

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