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The core satellite approach is an investment style that mixes index and active investments. While many advisors choose active management, a core satellite combines the low cost, tax efficiency and strong foundation of a diversified asset allocation found with a passive index portfolio and the opportunities for enhanced performance compared to its benchmark found with active management.
As your allocation is one of the key factors of the performance of a portfolio, a core satellite approach further allows for easier rebalancing to an allocation and the ability to easily move away from poor performing managers towards well performing ones. We believe that this allows us to achieve the best risk adjusted rate of return for your portfolio.
In order for active managers to charge their fees, they must disseminate away from their benchmarks, which increases the risk of the portfolio. While this can provide excess return, there is no reason to pay the higher fees for the index portion of your portfolio when lower fee options, including ETFs and low-cost no load funds, exist.
TCS Financial Services often uses ETFs as the core of our portfolios as they offer low fee options that are more tax efficient than mutual funds. The satellite or active portions of our portfolios consist of individual equities and active managers we feel can best provide your portfolio with excess alpha (increased returns compared to risk taken).
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