Core vs. Noncore Investments

One of the strategies that can be used in managing a portfolio is the core vs. noncore investment strategy (also called the core-and-satellite strategy). A core holding is just what it sounds like: It's the central part—or maybe even the only part--of your portfolio. The core requires investments that will be reliable year in and year out. They're the solid foundation for the rest of a portfolio. It's important to note that building a portfolio around a core is only one strategy of portfolio management, and you'll have to find the strategy that fits your specific needs.

When investors use this strategy, they start by building their portfolio's core and then finding noncore investments to augment those core holdings. Noncore investments might focus on an individual sector, such as health care, or a single region, such as Latin America. Because they're more focused, noncore investments have the potential to increase returns, but they may also increase a portfolio's volatility level.