NEW YORK ( Fabian Capital Management) -- In investing, as in strength training, your core is everything. It's the foundation or base from which you build upon to reach new levels of success.
Without a solid core, you are doomed to underachieve because you don't have the right balance needed to attain your goals. By starting from the ground up using concrete core holdings, you can add additional tactical positions from which to enhance your returns. That way you will have a well-rounded portfolio strategy that is easy to understand.
I define core investments positions as large, diversified, and liquid holdings that give you correlation to a broad index or segment of the market. Typically I allocate anywhere between 40-60% of my portfolio to core positions at any given time. The allocation typically shifts in response to changing market conditions in the context of an actively managed risk framework.
Exchange-traded funds are, without a doubt, the easiest way to add core positions to your portfolio because, in addition to the aforementioned traits, they are transparent, low-cost and easy to trade. There is an ETF for virtually any stock, bond, or commodity index that will give you instant access to a subset of underlying assets. However, with so many ETFs to choose from, many investors get overwhelmed by the breadth of options and settle for "plain vanilla" positions.Examples of plain vanilla core holdings include:
SPDR S&P 500 ETF
Vanguard Total Stock Market ETF
iShares MSCI EAFE ETF
iShares Aggregate Bond Fund
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV