Core Holding
Core holdings are the central investments of a long-term portfolio. Once an investor has built a strong core holding for their investment portfolio, they have more flexibility to take on risk in other areas of their portfolio. Core holdings are the central investments of a long-term portfolio so it's essential that they have a history of reliable service and consistent returns. A portfolio with core holdings that are consistent and reliable will benefit from stable growth in safer sectors of the economy, while also taking advantage of growth opportunities in its non-core investments. Core holdings in a well-diversified portfolio tend to outperform a portfolio consisting entirely of growth stocks. When you build a long-term portfolio with core holdings, it is also easier to monitor and rebalance because it only contains a few investments.
What Are Core Holdings?
Core holdings are the central investments of a long-term portfolio. When building your portfolio, it's essential that the core holdings have a history of reliable service and consistent returns.
A common strategy that investors use is to hold an asset that tracks the overall market for an extended time horizon, such as an S&P 500 index fund. They will then augment that asset with specific stocks or exchange-traded funds (ETF) to create opportunities for gaining better risk-adjusted returns.
These secondary investments are called satellite or non-core holdings. They focus on growth stocks or specific sectors of the market that are poised to outperform. Once an investor has built a strong core holding for their investment portfolio, they have more flexibility to take on risk in other areas of their portfolio.
How Core Holdings Work
Core holdings in a well-diversified portfolio tend to outperform a portfolio consisting entirely of growth stocks. A portfolio with core holdings that are consistent and reliable will benefit from stable growth in safer sectors of the economy, while also taking advantage of growth opportunities in its non-core investments.
When you build a long-term portfolio with core holdings, it is also easier to monitor and rebalance because it only contains a few investments. Furthermore, with this type of strategy, investors can expect less volatility and drawdowns than in an actively managed portfolio. This can help limit any negative effects of taxes and trading commissions on returns.
Typical Core Holding Investments
Core holdings often consist of index funds like the Dow 30 and S&P 500. There are also some individual stocks that can anchor the long-term performance of a portfolio. For example, Apple (AAPL), Amazon (AMZN), and Google (GOOGL) have all performed well over the past decade and should remain competitive for the coming years.
Other Attributes of Core Holdings
Related terms:
Blue-Chip Index
A blue-chip index seeks to track the performance of financially stable, well-established companies that provide investors with consistent returns. read more
Core Plus
Core plus is an investment management style that permits managers to add instruments with greater risk and greater potential return to a core base of holdings with a specified objective. read more
Drawdown
A drawdown is a peak-to-trough decline during a specific period for an investment, fund, or trading account. Drawdowns help assess risk, compare investments, and are used to monitor trading performance. read more
Equal Weight
Equal weight is a proportional measure that gives the same importance to each stock in a portfolio or index fund, regardless of a company's size. read more
Exchange Traded Fund (ETF) and Overview
An exchange traded fund (ETF) is a basket of securities that tracks an underlying index. ETFs can contain investments such as stocks and bonds. read more
Index Fund
An index fund is a pooled investment vehicle that passively seeks to replicate the returns of some market indexes. read more