{"id":1987,"date":"2025-04-28T08:13:49","date_gmt":"2025-04-28T08:13:49","guid":{"rendered":"https:\/\/www.innov8fs.co.za\/blog\/?p=1987"},"modified":"2026-03-18T11:46:05","modified_gmt":"2026-03-18T11:46:05","slug":"5-essential-rules-for-building-a-strong-core-portfolio","status":"publish","type":"post","link":"https:\/\/www.innov8fs.co.za\/blog\/2025\/04\/28\/5-essential-rules-for-building-a-strong-core-portfolio\/","title":{"rendered":"5 essential rules for building a strong core portfolio"},"content":{"rendered":"<p>There\u2019s a saying that goes \u201cif you fail to plan, you plan to fail\u201d. While that proverb applies to everything, it\u2019s particularly true of investing. Over the next two articles, we\u2019ll look at a series of rules and guidelines you can use to help build a brilliant investing foundation. In this article, we focus on the themes that underline a great core portfolio.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-1988\" src=\"https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2025\/04\/5-essential-rules-for-building-a-strong-core-portfolio.jpg\" alt=\"\" width=\"1400\" height=\"788\" srcset=\"https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2025\/04\/5-essential-rules-for-building-a-strong-core-portfolio.jpg 1400w, https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2025\/04\/5-essential-rules-for-building-a-strong-core-portfolio-300x169.jpg 300w, https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2025\/04\/5-essential-rules-for-building-a-strong-core-portfolio-1024x576.jpg 1024w, https:\/\/www.innov8fs.co.za\/blog\/wp-content\/uploads\/2025\/04\/5-essential-rules-for-building-a-strong-core-portfolio-768x432.jpg 768w\" sizes=\"auto, (max-width: 1400px) 100vw, 1400px\" \/><\/p>\n<h3>Rule #1: Work out what you want to gain from your investing<\/h3>\n<p>It\u2019s great to say you want to make more money but what do you want to work towards? Before you even think of opening an account to start your investing journey, you should have a strong idea about what you want to work towards and how much time you will need (or have) to reach those goals.<\/p>\n<p>Is it travelling the world? Paying down the car? Buying your first home? All the above?<\/p>\n<p>Whatever these goal(s) are, it\u2019s wise to work out what you want, how much you think it will cost, and how long a runway you will have to achieve these goals.<\/p>\n<p><strong>Setting these goals will help you for a few reasons:<\/strong><\/p>\n<ul>\n<li>It will force you to think about the medium or long-term goal you have in mind. Thinking long-term helps you ignore the noise, reinforce your strategy and keep you focused on the big picture.<\/li>\n<li>Setting concrete financial goals will help you work out what your time horizon is as well as the risk profile you have. For instance, if you\u2019ve got a 20-year runway, your risk profile will likely be very different to someone who has five years until their retirement.<\/li>\n<li>Finally, a longer investment horizon can reduce the risk of loss and give you exposure to most or all of the gains made during your investment journey.<\/li>\n<\/ul>\n<h3>Rule #2: Create a stable and diversified base<\/h3>\n<p>Every strong portfolio includes a number of assets that provide exposure to a range of asset classes that will perform well in most market scenarios.<\/p>\n<p>Let\u2019s break this sentence down part by part:<\/p>\n<ul>\n<li>\u2018A number of assets\u2019 does not mean doing the bare minimum. A strong core portfolio doesn\u2019t include just one equities ETF and one fixed income ETF.<\/li>\n<li>\u2018Exposure to a range of asset classes\u2019 means working out each asset class\u2019 strengths and weaknesses.\n<ul>\n<li>For instance, equities are a great growth asset to have. But when equities have a tough trot, which part of your portfolio will aim to cushion your losses? That\u2019s where an exposure to bonds, cash and commodities may be valuable.<\/li>\n<li>A diversified portfolio will also take sectors and even regions into account. Global equities are more than the US stock market and Australian shares are not just the banks and miners.<\/li>\n<\/ul>\n<\/li>\n<li>\u2018Most market scenarios\u2019 implies a range from sizeable downturns to sizeable upswings. Your core portfolio should provide you with decent protection against the first scenario and give you the opportunity to earn some upside in the second scenario.<\/li>\n<\/ul>\n<p>If you\u2019re a visual learner, it may help to use digital tools (or even a good old-fashioned pen and paper) to work out the asset allocation that is right for you. This will help you work out how much of your portfolio will be core investments and how much of it will be satellite investments.<\/p>\n<h3>Rule #3: Work out your core-satellite mix<\/h3>\n<p>The weighting in your portfolio for core investments versus satellite investments will be dependent on your time horizon and the amount of risk you\u2019re willing to take<sup>[1]<\/sup>.<\/p>\n<p>One general rule is that the longer your time horizon, the more risk you can afford to take by including more growth-oriented assets (e.g. equities) in your portfolio.<\/p>\n<p><strong>For those who prefer percentage guides, one common rule of thumb is the 80-20 rule (sometimes called the Pareto Principle). That is, 80% of your portfolio is in core investments and 20% is in satellite investments<\/strong><sup>[2]<\/sup><strong>.<\/strong><\/p>\n<p>Other guides present this allocation as a range. For instance, core investments can make up between 65% and 85% of your portfolio while satellite investments make up anywhere between 15% and 35% of the portfolio<sup>[3]<\/sup>. Again, your risk and your time horizon will determine your ideal allocation. If you have any doubt, you should seek personal financial advice.<\/p>\n<p><strong>These guides will also help you work out your allocation within core investments to each individual asset class.<\/strong>\u00a0For instance, if you are a younger investor with the advantage of a longer time horizon, you may decide that a significant weighting toward equities and thematic investments is for you. Alternatively, if you are an investor focused on keeping a steady income throughout your later life, then your combination may consist of more bonds, income-paying equities and cash than the previous example.<\/p>\n<h3>Rule #4: Cheaper is not always better \u2013 think differently<\/h3>\n<p>The legendary credit investor Howard Marks is known for saying \u201cit\u2019s not what you buy, it\u2019s what you pay\u201d<sup>[4]<\/sup>. Put another way, Marks is challenging us to focus on the value of an investment and not just the price.<\/p>\n<p>Every investment has its price, including ETFs, which have management fees attached to them. Active ETFs typically charge more than passive ETFs and some exposures within each category charge more than others. But be warned \u2013 cost is not everything.<\/p>\n<p>In that same vein, the best investors often have views that are independent of the consensus. To quote Marks once again, \u201cIf you want to be above average, you have to depart from consensus behaviour.\u201d<sup>[5]<\/sup>\u00a0Be prepared to read widely, think critically and invest accordingly.<\/p>\n<h3>Rule #5: The most important rule \u2013 Do your homework<\/h3>\n<p>Investing, in many ways, is a second job. Before you invest in anything, you need to make sure you do your homework.<\/p>\n<ul>\n<li>If you don\u2019t know something, read about it and don\u2019t invest in it until you are sure you understand what you\u2019re getting into.<\/li>\n<li>Complete a thorough check to make sure what you\u2019re investing in is legitimate.<\/li>\n<li>And finally, only invest what you can afford to lose.<\/li>\n<\/ul>\n<p>In part two of this series, we\u2019ll look at three rules to build out your satellite portfolio \u2013 or put another way, the spice that makes your total portfolio shine.<\/p>\n<h6>Credit: Hans Lee<\/h6>\n","protected":false},"excerpt":{"rendered":"<p>There\u2019s a saying that goes \u201cif you fail to plan, you plan to fail\u201d. While that proverb applies to everything, it\u2019s particularly true of investing.&hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1987","post","type-post","status-publish","format-standard","hentry","category-innov8ions"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1987","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=1987"}],"version-history":[{"count":3,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1987\/revisions"}],"predecessor-version":[{"id":1995,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/1987\/revisions\/1995"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=1987"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=1987"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=1987"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}