What Is Satellite Mutual Funds Portfolio?

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The portfolio of mutual funds needs to be created keeping in mind some general understanding which puts forth the concept of core and satellite mutual funds portfolio. This in general is an approach which is used by fund managers to build up a mutual funds portfolio.

What Is Satellite Mutual Funds Portfolio?

So to get started, with your mutual funds portfolio building, you need to first create a portion or divert funds in such schemes which provide a core or backbone to your overall portfolio and are able to reap good and steady returns over time irrespective of the market's huge fall if it may be the case.

Know how to create core portion of your mutual funds portfolio, here.

After you are done with the prime or ground work, now you can explore more of the options in respect of the schemes and can also afford to take more of risks.

So now the question that comes up, what goes into making the satellite portion of the mutual funds portfolio. This part is well constituted by differentiated schemes or say thematic or sectoral funds or other micro or small cap funds. Some other schemes that can be included in this portion are the closed-ended scheme which is redeemed after some time. These schemes provide return backed by the market conditions and may not perform well in all markets.

As an investor, you need to have a right core and satellite mix as else you could loose largely.So, the long term investment strategy for mutual funds will recoup reasonable gains and also enable you to take opportunistic advantage as and when they arise on a periodic basis. It is at best suggested to divert not more than 20-30% of your overall MFs portfolio into the satellite portion as then it can turn out to be very expensive for you.

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Story first published: Tuesday, September 26, 2017, 13:43 [IST]
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