Why Creating Two Portfolios is Essential

Rapid Summary

• Investors should consider having two types of portfolios: core and satellite.
• Core portfolios are goal-based and geared towards long-term wealth accumulation.
• Satellite portfolios focus on capturing short-term market gains.
• Solely focusing on either portfolio type can lead to biases: hyperopia (long-term focus) or myopia (short-term focus).
• An optimal allocation is suggested at 70% core and 30% satellite, with some flexibility.
• Gains from the satellite portfolio can be moved to the core, but not vice versa.

Indian Opinion analysis

The dual portfolio strategy offers a balanced approach for Indian investors by addressing both long-term and short-term financial objectives. The current volatility in markets accentuates the need for such a strategy, allowing investors to moderate emotional biases. This setup may enhance financial resilience against market swings, encouraging disciplined investment practices. Emphasizing an optimal split provides structure while accommodating personal risk preferences.

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