Core-Plus Investment Management: Balancing Risk & Return

Core plus is a management style characterized by mixing in a few high risk securities with an otherwise low risk core portfolio. This allows the investor to take on some risks in hopes of profit, but minimizes the chance for large-scale losses.

Core Plus Example

For example, you may have a portfolio that is largely holding bonds and low-risk securities for long-term growth. These low risk securities could make up as much as 75 to 80 percent of the entire portfolio. The remaining 20 percent, though, may be invested in a short-term opportunity like a commodity option contract or a real estate investment.

Core Plus Mutual Fund 

For a mutual fund, the "core" classification means the fund holds a variety of large, mid, small and multi-cap funds that truly blend the value across a number of different markets. Each of the securities, though, would be consistent with the growth investment style of the fund, meaning the goal is to provide capital gains and not just short-term investment. A number of core mutual funds are offered through 401(k) or IRA accounts because of their ability to provide stable, yet slightly aggressive growth overtime without exposing an investor to too much risk.