How to Build an ETF Portfolio: Core-Satellite and 3-Fund Portfolio

You can choose one good ETF. Now let's put together a whole portfolio — one that is diversified, low-cost, and easy to maintain. We'll show two proven approaches: the simple 3-fund and the more flexible Core-Satellite.

★ Principle: A good portfolio isn't "the most ETFs." It's a well-constructed handful that covers the world, matches your risk, and can be maintained in a few minutes a year.

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Approach A: 3-Fund Portfolio (the king of simplicity)

Three building blocks cover practically the entire spectrum:

Component	What it does	Example type of ETF
Global Stocks	Growth engine	global stock ETF (developed + emerging)
Domestic/US Stocks	Supplement and stability	ETF on S&P 500 or US total market
Bonds	Volatility dampener	broad bond ETF

You manage the ratio according to age and risk. A rough rule (not a dogma): bond share ≈ your age, the rest in stocks. Younger = more stocks (growth), older = more bonds (calm).

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Approach B: Core-Satellite

Core (~70–90%) = boring, cheap, broad index ETFs. Your backbone, which you don't touch.
Satellites (~10–30%) = smaller targeted bets: sector, factor, theme, region — where you have an opinion.

★ Insight: Core-Satellite allows you to stay disciplined while having fun. The core carries you through the market, satellites satisfy the urge to "do something" — but only with a small part, so one bad idea won't sink the whole portfolio.

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Position Sizing and Diversification

• Don't overdo the number. 3–6 ETFs are enough. Twenty ETFs largely overlap (illusion of diversification).
• Beware of hidden overlaps. ETF on S&P 500 + ETF on "US tech" = large overlap (tech is already in S&P). You're not as diversified as you think.
• Currency and region. Consider currency risk (USD vs CZK) and geographical distribution.

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Rebalancing — Maintenance from Time to Time

Over time, the market will skew your ratios (stocks grow, weight increases). Rebalancing = you return the ratios to target. Two methods:

1. Time-based — once a year (simple).
2. Threshold-based — when a component deviates by more than, e.g., 5 percentage points.

★ Rebalancing forces you to do what's psychologically hard: lighten what has grown and buy more of what has fallen. It's built-in discipline to "sell high, buy low."

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DCA — How to Fill the Portfolio

Dollar-Cost Averaging = regularly the same amount (e.g., monthly). Spreads the risk of poor timing and makes investing a habit, not stress. Ideal for a long-term ETF portfolio.

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How QMA Helps

• Portfolio + Journal — track weights, P&L, and taxes in one place.
• Dividend Section — for distribution ETFs and income planning.
• Market Phase on Dashboard — helps decide how aggressively to tune satellites (more in the next article).

Summary

Start with a core of broad, cheap index ETFs, add bonds according to your tolerance, and optionally a few satellites for targeted bets. Keep 3–6 funds, watch for overlaps, and rebalance once a year. Simple, cheap, maintainable — exactly what wins in the long run.

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Specific ETFs and tickers are mentioned for illustration only, not as a purchase recommendation. QMA is an analytical tool, not a registered investment advisor. Past performance does not guarantee future results. Investing carries the risk of capital loss.*