The ideal approach to investing is to start off with your long term goals. You determine your goals, impute a value to it and work backwards. The major focus is on asset allocation and this is normally done through a portfolio of equity, debt and liquid funds. The focus here is not on the best performers but the ones that are the best for you. Typically, core portfolio must constitute 80-90 % of your investable corpus and must be reviewed and rebalanced periodically. This ensures that your goals are not compromised in any market shock.

The satellite portfolio is more of an adjunct portfolio that focuses on risk-adjusted returns and short to medium term opportunities. Of course, this must not exceed 10-20% of your surplus and is purely meant for (what is called) alpha. These opportunities may arise from undervalued equities, impact of rate cuts on debt or the impact of uncertainty on gold. This segregation ensures that you don’t risk your life goals.