Core-Satellite Strategy
The Core-Satellite Strategy
The core-satellite approach is one of the most practical portfolio construction methods for NSE investors. It divides your portfolio into two parts: a stable core of blue-chip holdings and a smaller satellite allocation for higher-growth or higher-risk opportunities.
The Core (60-70% of Your Portfolio)
Your core should consist of large, stable, well-established companies with consistent track records. On the NSE, these are the blue-chip stocks that form the backbone of the market:
- Safaricom (SCOM) — Dominant telecoms player with strong M-Pesa revenue
- Equity Group (EQTY) — Leading bank with growing regional presence
- KCB Group (KCB) — Largest bank by assets with strong East African operations
- EABL (EABL) — Market leader in beverages with consistent dividends
- Co-operative Bank (COOP) — Strong retail banking franchise
These companies have large market capitalisations, healthy liquidity, and a history of paying dividends. They provide stability and steady returns.
The Satellites (30-40% of Your Portfolio)
Satellites are smaller positions in companies with higher growth potential or special situations:
- Mid-cap growth stocks — Companies like Stanbic or NCBA that are growing faster than blue chips
- Value opportunities — Stocks trading below their intrinsic value that may be overlooked by the market
- Sector bets — A position in an insurance or manufacturing stock you believe will outperform
Why This Works
The core provides stability and dividends while the satellites provide upside potential. If a satellite position does not work out, it represents a small portion of your portfolio. If it does work, it boosts your overall returns significantly.
Think of your core as the foundation of a house. Solid and reliable. The satellites are the decorative elements that add character and value.