Satellite Investment

Satellite investment refers to a strategy where an investor allocates a portion of their portfolio to higher-risk, often higher-reward assets, while maintaining the majority of their investments in more stable, core holdings. The core investments typically consist of low-risk, traditional assets such as large-cap stocks or bonds, forming the foundational part of the portfolio. In contrast, satellite investments include smaller companies, international stocks, sector-specific funds, or alternative investments that are intended to enhance returns and provide diversification.

The primary aim of satellite investing is to improve overall portfolio returns without significantly increasing risk. Investors use this approach to capitalize on specific market opportunities or trends, while still relying on the stability of their core investments. The satellite can also serve as a hedge against market volatility by spreading risk across different asset classes or sectors.

In summary, satellite investment allows for the pursuit of growth through opportunistic investments, while grounding the portfolio with a solid core of safer, more reliable assets.