Core Satellite Portfolios In The Current Pandemic
We have always advocated using both of Strategic Asset Allocation (SAA) (core) portfolios and Tactical Asset Allocation (TAA) (satellite) portfolios together (see here for a list of articles). The idea behind a core satellite portfolio is to combine the strengths of both types of portfolios:
- The steady (buy and hold) nature of an SAA portfolio to complement/remedy losses caused from whip-saw or false negative risk reduction in a TAA portfolio.
- The avoidance of big loss from a TAA portfolio to hedge the inherent market loss in an SAA portfolio.
The following table illustrates the benefits in different phases of a market:
|Early Bull||Late Bull||Bear||Side Way|
|Passive Buy and Hold (Strategic Asset Allocation)||Good||Good||Bad||OK|
|Tactical Asset Allocation||Miss||Good||Good||Bad|
It’s thus interesting to revisit some of the core satellite portfolios we proposed before and see how they have performed so far in the current pandemic that probably falls into either Bear or Side Way phase.
Please login or register an account to view the newsletter