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What is core-satellite investing, and why this expert has built her portfolio around it

·3-min read
Wadzanai Nenzou smiles while sitting in a park, graphic showing stock prices.
Wadzanai Nenzou says perfectionism used to be a barrier to investing. Here's how she invests today. (Images: Getty).

Read part one to find out the catalyst for Wadzanai Nenzou to launch Herconomics, and the woman that changed her life.

Have you ever given up on a project because you couldn’t get it 100 per cent perfect?

If you have, you’re not alone. A study analysing rates of perfectionism from 1989 to 2016 found the number of people with perfectionist tendencies has significantly increased.

The founder of investing education platform Herconomics, Wadzanai Nenzou, is one of those people, and it nearly prevented her from making her first investment.

Despite working in finance, she made it into her 30s before she actually felt like she knew enough to buy her first share.

“The issue was because I, like a lot of women – and a lot of people in general, but mainly women – think that investing is really complicated, and it’s really scary. I thought that I needed to have everything perfect and understand every little detail,” she told Yahoo Finance.

Now, it’s her personal mission to help other women overcome the problems she struggled with.

She began investing through exchange-traded funds, or ETFs. This investment vehicle is essentially a basket of shares that are either listed on the same index or follow a theme like sustainability.

Nenzou still considers ETFs a good place for investors to start.

Her first direct share was with Bendigo Bank.

“I’m a bit biased because I work for them as well, but I’m a big believer in investing in things you understand, whether it’s an industry you understand or a company,” she said.

“[Berkshire Hathaway CEO] Warren Buffett talks about that all the time, about not investing in industries that you don’t understand.”

Today, Nenzou uses the ‘core-satellite’ strategy to invest.

What’s the core-satellite investing strategy?

Nenzou said one of the first things investors need to understand is the different roles companies can play in your investment portfolio.

For example, a growth stock is any stock that is predicted to grow significantly faster than the rest of the stock market, but generally won’t pay dividends.

A value stock, on the other hand, is more likely considered a company that is currently at a bargain price due to temporary difficulties, but has strong prospects.

Nenzou herself chooses to use the core-satellite approach to achieve her financial goals.

The core-satellite approach means having the bulk of your investments in lower-risk holdings like index funds, ETFs or even government bonds. That forms the core of your portfolio.

Then, investors have their ‘satellites’ – their smaller, higher-risk and hopefully higher reward investments.

“The advantage of that portfolio is [you] get a balance to safeguard that portfolio, but potentially get the next big thing,” Nenzou said.

As she said, she wants to be able to “choose the next Amazon”, and potentially see those eye-watering gains.

Read part one to find out the catalyst for Wadzanai Nenzou to launch Herconomics, and the woman that changed her life.

Take control of your money and learn to maximise it with the Women’s Money Movement! Join the club on LinkedIn and follow Yahoo Finance Australia on Facebook, Twitter and Instagram, and subscribe to the Women’s Money Movement newsletter.

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