Investing in emerging technologies using a core-satellite strategy

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With major changes, both economical and geopolitical, new opportunities emerge. This requires investors to look beyond their current holdings, and identify what can be the next big thing. When working with your existing methods, this normally does not work. This also relates to Einstein, who said that it is hard to solve problems with the same thinking that created them. If you want to jump on the next bandwagon, you need to get out of your comfort zone and existing strategies. For traditional investors, this is very tough. Therefore, we created this guide to invest in emerging technologies while keeping true to your existing investment methodology.

Start with dividing your portfolio into pieces

If you have a single portfolio overview, it is time to break it apart. A typical strategy that refers to this is the core-satellite strategy. In this strategy, you allocate a majority of your portfolio to known long-term investments such as index funds and blue-chip stocks. The short-term and mid-term stocks can be considered the satellites: they revolve around the core and can be replaced and sold more frequently to adjust to market conditions. Especially in the current market, this can be a strong strategy that allows you to adjust.

Portfolio tracking can help achieve this

When you use a portfolio tracker app, this can help you to create insight into how your portfolio is looking. In such an application, you can create a breakdown using clusters. For example, you can cluster your ‘core’ as your index funds and long-term investments. Whereas you can direct a part of your portfolio to specific satellites e.g., fintech.

Selecting new investment options

When you have allocated your investments to either core or satellite, you need to do a validation: is my core big enough? If it turns out you invest too much in short-term and mid-term stocks, it is time to adjust the course. Next, you need to understand what you are investing in. How much is allocated to technology? What emerging markets do you want to be exposed to? This helps you to define a strategy to follow.

An investment strategy is crucial

Executing a core-satellite strategy can be hard when not following a strategy. You need to have a clear division of investment areas with corresponding percentages to make it work. It helps to do quarterly reviews and see if the percentages still make sense. If not, you need to rebalance your portfolio. This helps you to focus on growth areas and also to identify new ones.

More satellites equal more research effort

You do need to take into account that the more satellites you have, the more research is needed. Also, if you want to expand your satellites, you need to do research in new fields. For example, if you want to turn to EVs you need to understand the market to make proper investment decisions. You can also decide to select an index fund that is investing in a particular field, but this comes with a management fee and thus makes your return on investment lower.

Learn more about stock tracking

Want to learn more about investing and stock tracking? You can visit one of the leading providers of stock tracking technology, Delta, to understand the features and potential. You can visit them through the following URL: https://delta.app/en/stocks-tracker.