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What Is Core-and-Satellite Strategy And How Can It Help Investors Navigate Market Volatility?
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The ‘core’ typically makes up around 60–70% of a portfolio and is meant to deliver stable returns while serving as its foundation.
Small and mid-cap stocks produced 14-17% returns in the last 20 years. (representative image)
Navigating financial markets often seems like an uphill task as investors need to balance the desire for growth with the fear of sudden downtrends. When markets fall, people struggle to find the right direction while chasing high returns and protecting their wealth from volatility. Too much risk can lead to panic mode, while excessive caution could leave your portfolio lagging behind inflation and long-term goals.
A practical solution here is the core-and-satellite strategy emerges as a practical solution. Under this, investors get to combine a stable “core” of diversified, low-cost investments with the dynamic “satellite” portion to target higher-growth opportunities. Not only does it allow them to achieve resilience and flexibility, but the strategy also ensures steady progress even during turbulent times. By following this dual approach, people can cushion portfolios against market downfalls.
How Does It Work?
According to Moneycontrol, the “core” usually accounts for nearly 60-70 per cent of the portfolio. It is specifically designed to provide steady returns and act as the anchor of your portfolio.
It comprises stable, low-cost funds:
1. Large-cap equity funds: Your hard-earned money gets invested in established companies having proven business models. Often, it is seen that they appear to fall less compared to mid and small-cap funds.
2. Flexi-cap funds: The fund managers keep shuffling the investment between large, mid and small caps, depending on the ongoing condition of the market. In simple terms, these add flexibility and diversification to the portfolio.
3. Hybrid funds: A combination of equity and debt, these are meant for growth and stability.
However, investors must note that even the “core” is not free from risk. Moneycontrol report highlights how markets fell nearly 14 per cent between October 2024 and February 2025.
The Role of Satellite Investments
Keeping core aside, the remaining 30-40 per cent is what makes up satellite investments.
“The satellite portfolio allows tactical exposure to high-growth sectors, themes, or strategies,” the report quoted Kirang Gandhi, a Pune-based financial mentor, as saying.
This includes mid-cap and small-cap funds that hold higher growth potential. Also, it features international equity funds.
This highlights that it is the growth engine of the portfolio, but also carries substantial risk.
A key part of the core-and-satellite approach is “balance,” where the core allows the money to grow steadily and the satellite portion adds more potential without putting the portfolio at risk.
In the last 20 years, the small and mid-cap indices have generated nearly 14-17 per cent returns on an annual basis, leaving behind large-cap indices. Investors must note that falls are more frequent in mid and small-cap stocks.
Using the core-and-satellite strategy, investors get to diversify their portfolio without making it too complicated.
Kirang Gandhi said this strategy combines safety with smart opportunity for Indian investors and avoids overexposure.
“It brings structure, discipline, and clarity to long-term wealth building without chasing trends,” Gandhi concluded.
January 10, 2026, 13:40 IST
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