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Although they would not admit it, most portfolio managers take a core/satellite approach when managing their equity portfolios. The part of the portfolio that might mirror the overall market could be considered the “core” and the part of the portfolio that deviates from the overall market can be considered the “satellite” portion. When you hear portfolio managers say they are trading around their “core” bank holdings – or they are currently overweight oil stocks and underweight technology stocks, or they have a small cap tilt to their portfolios – they are essentially taking the core/satellite approach.  But what about the average investor? Exchange-traded funds (ETFs) provide an easy way of implementing a core/satellite approach. We provide 10 reasons why this strategy can trump securities-only portfolio management strategies.

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