Investing solely in ETFs or index funds can be an excellent approach. However, by utilizing the “Core-Satellite Strategy,” you can balance stable asset management with the pursuit of growth. This strategy divides your portfolio into the core (main) and satellite (peripheral) portions, each with different objectives.
Investments Suitable for the Core: S&P 500 and Global Stocks
The core portion aims for stable asset management, making index funds and ETFs an ideal choice. In particular, the S&P 500 and global stocks are well-suited for long-term investment and are popular among investors.
1. S&P 500
- This index focuses on 500 major U.S. companies.
- It includes notable companies like Apple, Amazon, and Google, which are representative of the U.S. economy.
- Since it relies on the growth of the U.S. economy, it can yield significant profits during prosperous periods. However, it also carries risks when the U.S. economy underperforms.
2. Global Stocks
- This index diversifies investments across thousands of companies worldwide.
- It includes countries like the U.S., Japan, Europe, and emerging markets.
- Targeting global growth, it provides a high level of risk diversification. Even if one country’s economy falters, others may compensate, reducing dependence on a single nation.
The Role of the Core and My Choice
The core portion is designed for steady growth. By investing in index funds or ETFs like the S&P 500 and global stocks, you can aim for annual average returns of 7% to 10% without taking on significant risks.
I personally choose global stocks as the core of my portfolio for the following reasons:
- High risk diversification: Currently, approximately 60% of the global stock index consists of U.S. companies. However, the allocation ratio shifts depending on global economic conditions, minimizing reliance on any single country.
- Peace of mind: For me, global stocks offer the assurance needed to continue monthly investments consistently.
The S&P 500 is also attractive due to its slightly higher growth potential. The U.S. population is expected to grow for the next 100 years, supporting long-term economic growth.
The Role of the Satellite: Exploring Individual Stocks
While maintaining stable asset management in the core, the satellite portion allows for growth-oriented investments. For example, if you’re interested in exploring individual stocks, the satellite strategy enables you to experiment while managing risks effectively.
My Approach to Investing in Individual Stocks
- Choose companies you want to support: Start by listing companies you’re interested in or want to support.
- Check long-term performance: Review the company’s stock chart to ensure it has an upward trend.
- Analyze financial performance: Examine the company’s long-term financial performance and assess whether you can envision its success 10 years from now.
- Make a trial investment: Begin with a small amount, observe its performance, and gradually increase your investment.
Conclusion
The core-satellite strategy is an effective method that combines stable asset management with growth-oriented investments. By steadily growing your assets through the core portion while enjoying the challenge in the satellite portion, you can maximize the potential of your investments. I am personally practicing this strategy as I explore the balance that suits me best. Of course, investing solely in ETFs or index funds can be sufficient to grow your assets. However, if you’re interested in trying individual stocks, I encourage you to give this strategy a try and discover the optimal long-term asset management method for you!
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