If you decide to self-manage your investments, you should keep the investment process simple. Here, we discuss how to create a simple behaviourally optimal portfolio within the core-satellite framework.

Your investment process should moderate biases relating to your investment decisions. The important behaviour traits you should address are regret and present biases. You can moderate future regret by keeping the choice of investments simple. Present bias — the desire to spend now instead of saving for the future —— can be moderated by setting up systematic investment plans (SIPs).

Consider your investment choices. For the core goal-based portfolio, you can choose active mutual or passive funds (index funds/ETFs). An active fund chosen may do well but not as good as some other funds you did not choose. That can open the door for regret.

ETFs/index funds do not expose you to such regret as such funds on the same benchmark give similar returns. So, choosing one passive fund instead of another may not cause regret in the future.

Your satellite portfolio is meant to help capture short-term market fluctuations. You could buy individual stocks and ETFs. Equity ETFs appear optimal as they contain a basket of stocks. For instance, if an index constitutes 40 stocks and 15 of them dip, there is a strong likelihood the balance 25 stocks may push the index up. An ETF on an index is, therefore, likely to cause less regret in the future than a bet on an individual stock. Then, with global geopolitical tensions, there is investor preference for gold and silver. Buying ETFs on these metals is simpler than buying physical assets. Core portfolio can have just one ETF for each goal. Your satellite portfolio can contain, if you consider appropriate, an index ETF, a gold ETF and, perhaps, a silver ETF.

A simple core portfolio may not help earn more returns than a benchmark index but it could help you achieve your goals. The objective is to keep investment process simple and moderate future regret. Based on the core portfolio framework, you should have one portfolio (one ETF and bank deposit) for each goal, as risk appetite is different for each goal. For instance, you may want a conservative allocation (more bonds) for a child’s education portfolio and an aggressive allocation for a retirement portfolio.

(The author offers training programmes for individuals to manage their personal investments)

Published on July 19, 2026